When finding the Aggregate Demand curve, are you getting Real GDP?

Asked on by artnoun1

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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If I understand your question correctly, the answer is yes.  When you create an aggregate demand curve, you are finding the various levels of Real Gross Domestic Product that could occur in a given economy.

We can know this simply by looking at what the axes on the graph represent.  The vertical axis is the price level in the economy.  The horizontal axis is Real GDP.  This means that an aggregate demand curve is telling us what combinations of RDGP and price level are possible in a given economy.

However, in order to know exactly what the RGDP is or will be at a given time, the aggregate demand curve is not enough.  In such a case, you need both an AD curve and an aggregate supply curve.  The intersection of the two curves will tell you the RGDP.

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