ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.

Detailed explanation-2: -It is important to remember that aggregate demand is the total demand for domestically produced goods and services; therefore, exports are added to the aggregate demand, whereas imports are subtracted. The measure of exports minus imports is called Net Exports, an important determinant of aggregate demand.

Detailed explanation-3: -Aggregate demand increases when the components of aggregate demand–including consumption spending, investment spending, government spending, and spending on exports minus imports–rise.

Detailed explanation-4: -Income and Wealth As household wealth increases, aggregate demand typically increases. Conversely, a decline in wealth usually leads to lower aggregate demand. When consumers are feeling good about the economy, they tend to spend more and save less.

Detailed explanation-5: -Exports are products produced domestically and sold abroad, and imports are products produced abroad but purchased domestically. Since aggregate demand is defined as spending on domestic goods and services, export expenditures add to aggregate demand, while import expenditures subtract from aggregate demand.