Homework Help

If aggregate demand is same as Gross Domestic Product, why is a different concept...

user profile pic

aarsh | Student, Undergraduate | eNotes Newbie

Posted November 27, 2010 at 4:32 PM via web

dislike 1 like

If aggregate demand is same as Gross Domestic Product, why is a different concept introduced?

1 Answer | Add Yours

user profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted November 27, 2010 at 6:21 PM (Answer #1)

dislike 1 like

Aggregate demand is a curve that represents the total demand in a nation of goods and services for changing price levels. One of the points on this curve which corresponds to a particular price level denotes the real GDP of the nation. The two are not exactly the same.

If we want to plot aggregate demand graphically we have the x-axis denote the real GDP and the y-axis denote the price. Now, price is usually the consumer price index or CPI or the GDP Price Deflator.

So aggregate demand is the entire curve of changing real GDP for different values of price. The aggregate demand curve can also shift, to the left or the right if there are changes in the consumption of goods and services within the nation.

Join to answer this question

Join a community of thousands of dedicated teachers and students.

Join eNotes