ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate demand 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: -Demand-pull inflation is inflation caused by an increase in AD. As you can see on the graph below, if there is an increase in AD the price level increases. Inflation is the rate of increase in the price level. A decrease in AD will cause the level of output to decline indicating higher unemployment.

Detailed explanation-3: -Aggregate demand can be impacted by a few key economic factors. Rising or falling interest rates will affect decisions made by consumers and businesses. Rising household wealth increases aggregate demand while a decline usually leads to lower aggregate demand.

Detailed explanation-4: -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.