Aggregate demand is the total quantity of goods and services demanded across all levels of an economy at a particular time and price level. It reflects the aggregate expenditure for 'everything that will be bought' in an economy.
Aggregate supply, also known as total output, represents the total amount of goods and services that firms in a national economy are willing to sell during a specific time period at different price levels.
The Aggregate Supply (AS) Curve represents the total quantity of goods and services that firms in an economy are willing and able to produce at each price level within a given range of prices. Illustrated on a graph, the curve typically slopes upward, indicating that higher price levels generally encourage firms to increase production.
Demand-pull inflation occurs when the aggregate demand in an economy outpaces the aggregate supply, leading to an increase in the general price level.
An inflationary gap occurs when aggregate demand exceeds aggregate supply, causing price increases in a fully employed economy or production increases if the economy is not at full employment. This phenomenon is often attributed to government deficits and excess spending.
Keynesian Economics is a body of economic thought originated by the British economist John Maynard Keynes. Keynes asserted that government should manipulate the level of aggregate demand to address unemployment and inflation.
Macroeconomic equilibrium is the point at which total aggregate income, or Gross Domestic Product (GDP), is produced when expected demand and supply are equated. This level of income consists of the planned spending of consumers, businesses, and government.
The Paradox of Thrift is the proposition that increased saving by households reduces their consumption and, consequently, reduces Gross Domestic Product (GDP).
