Aggregate demand shifts and the downward slope

Question 1

what is aggregate demand

Answer 1

the total demand for a country’s good or services at a given price level in a given period of time

Question 2

equation for aggregate demand

Answer 2

consumption + investment + government expenditure + net exports

Question 3

movements along the AD curve

Answer 3

-fall in price level = extension
-rise in price level = contraction

Question 4

why is the AD curve downward sloping

Answer 4

1) wealth effect: lower PL, higher PP, more likely to consume, leading to extension
2) trade effect: lower PL, exports more competitive imports less competitive, therefore rise in net exports
3) interest effect: lower PL, less likely to increase IR, closer to target, encouraging more consumption