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Aggregate demand is represented by the '''Aggregate demand curve'''. The aggregate demand curve looks similar to a regular demand curve, however the Y-axis represents '''price level''', and the X-axis represents '''real output'''.
Aggregate demand is represented by the '''Aggregate demand curve'''. The aggregate demand curve looks similar to a regular demand curve, however the Y-axis represents '''price level''', and the X-axis represents '''real output'''.
The aggregate demand curves downwards. There are various reasons for this, including:
*The lower the price level, the richer individuals perceive themselves to be and the more they consume.
*When price levels are low, the reserve bank tends to decrease interest rates, resulting in higher consumption.
*A lower price level improves the international competitiveness of a country, resulting in higher net exports.
==References==
==References==