Overview
Aggregate demand plays a crucial role in determining the overall economic activity and employment levels in a country. It consists of various components, including consumption, investment, government spending, and net exports. Understanding how these components interact helps explain fluctuations in...
Key Terms
Example: An increase in consumer spending raises aggregate demand.
Example: If 10 out of 100 workers are unemployed, the unemployment rate is 10%.
Example: A recent graduate looking for their first job is frictionally unemployed.
Example: Workers in coal mining may become structurally unemployed as the economy shifts to renewable energy.
Example: During a recession, many businesses lay off workers, leading to cyclical unemployment.
Example: Increasing government spending can boost aggregate demand.