Aggregate demand and factors determining it

Aggregate supply and its factors

Macroeconomic equilibrium between real output and price level

Questions for independent work

Tests

Tasks and problem situations

Literature

8.1. Aggregate demand and factors determining it

Aggregate demand. Aggregate demand curve. The process of combining individual prices for goods into a total price (price level), reducing the equilibrium quantity of individual goods into the real volume of national production is called ahregistration. If the essence of aggregation is understood, it becomes possible to move on to the analysis of aggregate demand and aggregate supply, because the curves of these concepts can be constructed only on the basis of clarifying the relationship between the aggregate price (price level) and the real volume of national production, which are plotted respectively on the ordinate and abscissa axes.

Aggregate demand- this is the need for goods and services on the part of the population, enterprises, the state and foreign countries, presented in monetary form. It represents an abstract model of the relationship between the price level and the real volume of national production. The general characteristic of this model is that the lower the price level for goods, the larger part of the real volume of national production buyers will be able to purchase. Conversely, a higher price level is accompanied by a fall in the possible volume of sales of the national product. Consequently, there is an inverse relationship between the price level and the real volume of national production. It is most clearly expressed through the aggregate demand curve (Fig. 8.1).

Rice. 8.1. Aggregate demand curve

Descending curve shape AD shows that at a lower price level, a larger volume of national product will be sold.

Total price factorsdemand. The price factors of aggregate demand include, first of all, the effect of the interest rate, the effect of material assets, or

ABOUT ~X real cash balances, and the effect

import purchases.

Interest rate effect influences the nature of the movement of the aggregate demand curve in such a way that, on the one hand, consumer spending and, on the other, investment depend on its level, i.e. As the price level rises, interest rates rise, and rising interest rates are accompanied by a decline in consumer spending and investment. The fact is that an increase in the price level expands the demand for cash. Consumers need additional funds to make purchases, entrepreneurs need additional funds to purchase raw materials, equipment, pay wages, etc. If the volume of money supply does not change, the price for using money increases, i.e. interest rate, and this limits expenses on both purchases and investments. It follows that an increase in the price level for goods increases the demand for money, raises the interest rate and thereby reduces the demand for the real volume of the national product produced.

Wealth effect (wealth effect) also increases the downward trajectory of the aggregate demand curve. This is due to the fact that as prices rise, the purchasing power of financial assets such as fixed-term accounts and bonds decreases, real incomes of the population fall, and therefore the purchasing power of families decreases. If prices fall, purchasing power increases and expenses increase.

Effect of import purchases expressed in the ratio of national prices and prices on the international market. If prices on the national market increase, buyers buy more imported goods, and sales of domestic goods on the international market decrease, i.e. the effect of import purchases leads to a decrease in aggregate demand for domestic goods and services. A decrease in prices for goods strengthens the export capabilities of the economy and increases the share of exports in the aggregate demand of the population.

Non-price factors of aggregate demand. These include changes in consumer, investment and government spending, and in spending on net exports. The effect of non-price factors is also accompanied by changes V aggregate demand. If it contributes to an increase in aggregate demand, then the curve from the line ADj shifts to AB 2 ; if non-price factors limit aggregate demand, the curve shifts to the left to AD 3 (Fig. 8.2).

Changes in consumer spendingduh can influence aggregate demand under the influence of various motives. Let us give a clear example with the purchase of imported goods. Previously, a version of the action of price factors was given, in which a change in the price level in the foreign and domestic markets leads to a change in aggregate demand in one direction or another.

Rice. 8.2. Changes side. However, such changes in pro-Soviet demand also occur at constant prices: it turns out, for example, that Austrian shoes that appeared on the Italian market are of high quality and the demand for these products at equal prices will go up. There are many such options for the action of non-price factors, but they are classified according to individual characteristics, and then within the same consumer expenditures we can identify factors that affect aggregate demand, such as consumer welfare, consumer debt and taxes.

If we turn to the factor of consumer welfare, we can see that it depends on the state of affairs in the field of financial assets (stocks, bonds) and the situation with real estate (land, buildings). Thus, an increase in stock prices at a constant price level on the market will lead to an increase in welfare and aggregate demand will increase. At the same time, falling land prices will reduce welfare and reduce aggregate demand.

Examples can also be given with consumer expectations. If consumers expect their incomes to increase in the near future, they will now begin to spend significantly more of their income, which will shift the aggregate demand curve to the right. In the reverse perspective, purchasing actions will be limited and the aggregate demand curve will shift to the left. A shift in aggregate demand in the event of impending inflation is very sensitive. Each buyer strives to make a purchase before the price increase, but will delay it in the first days after the increase.

The size of aggregate demand is also affected by consumer debt. If a person purchased a large item on credit, then for a certain time he will limit himself in other purchases in order to quickly pay off the required amount. But once you pay off the debt, the demand for purchases quickly increases.

There is a direct connection between the amount of income tax and aggregate demand. The tax reduces family income, so its increase reduces aggregate demand, and its decrease expands the latter.

Changes in investments also affect aggregate demand. If enterprises acquire additional funds in order to expand production, the aggregate demand curve will go to the right, and if the trend is reversed, it will go to the left. Interest rates, expected returns on investments, corporate taxes, technology, and excess capacity can all operate and be influenced here.

When we talk about the interest rate, we do not mean its shift up or down (this was taken into account in price factors), but movement under the influence of changes in the money supply in the country. An increase in the money supply reduces the interest rate and increases investment, while a decrease in the money supply increases the interest rate and limits investment. Expected profits increase the demand for investment goods, while business taxes reduce the demand for investable goods. New technologies stimulate investment processes and expand aggregate demand, and the presence of excess capacity, on the contrary, restrains the demand for new investment goods.

Government spending affect aggregate demand due to the fact that, with constant tax collections and interest rates, government purchases of the national product expand, thereby increasing the consumption of commodity values.

Aggregate demand is also related to expenses for exporting goods. The principle here is this: the more goods enter the world market, the wider the aggregate demand. The fact is that the increase in national incomes of other countries allows them to expand the purchase of imported goods and products, which expands the demand for goods in those countries from which goods are imported. Therefore, for developed countries, foreign trade is beneficial with both developing and developed countries. In the first case, they have the opportunity to sell products that are not in demand in civilized markets; in the second, on the contrary, they can cover the requests of other states for modern goods and services.

Lecture 10 (2 hours).

GENERAL MACROECONOMIC EQUILIBRIUM: AD – AS MODEL OF AGGREGATE DEMAND AND AGGREGATE SUPPLY.

1. Aggregate demand and the factors that determine it.

2. Aggregate supply: classical and Keynesian model.

3. Macroeconomic equilibrium in the model of aggregate demand and aggregate supply.

4. Shocks of supply and demand. Stabilization policy.

General macroeconomic equilibrium is the equilibrium state of the entire market system; it is the establishment of equality of supply and demand in all interconnected markets. On market of final goods and services equilibrium will mean that producers maximize income, and consumers receive maximum utility from the products they buy. Equilibrium on factor market shows that all production resources supplied to it have found their buyer, and the marginal income of resource owners, which forms demand, is equal to the marginal product of each resource, which forms supply. Equilibrium on money market characterizes the situation when the amount of expected funds is equal to the amount of money that the population and entrepreneurs want to have.

Macroeconomic equilibrium is a state of the economic system in which there is equality in the volume of production and the volume of consumer demand.

Aggregate demand and the factors that determine it.

Aggregate demand is the real volume of gross production Y (or the volume of total output) that consumers (households, firms, government) are willing to buy at the existing price level P, this is the sum of all expenditures on final goods and services produced in the economy.

In the absence of restrictions on production, as well as in the absence of strong inflation, growth in aggregate demand stimulates an increase in output and employment, having little impact on the price level.

If the economy is close to full employment, then an increase in aggregate demand will cause not so much an increase in output (since almost all capacity is already used) but an increase in prices.

Fig. 10.1. Aggregate demand curve

The aggregate demand curve AD shows the quantity of goods and services that consumers are willing to purchase at each possible price level (Fig. 10.1). It gives such combinations of output and the general price level in the economy at which the commodity and money markets are in equilibrium. The aggregate demand curve AD is similar to the market demand curve in microeconomics.

The downward-sloping nature of the aggregate demand curve or, which is the same thing, the inverse relationship between the price level and the amount of aggregate demand, is explained by price and non-price factors. Beginning of the form

End of form

Price factors aggregate demand, or price effects, This:

Interest rate effect (loan interest);

Wealth or cash balance effect;

The effect of import purchases.

Interest rate effect manifests itself in the fact that price rise increases the demand for money. With a constant volume of money supply, this increases the interest rate, that is, the fee for using money, this leads to reduce some spending by businesses (they reduce investment) and consumers (they postpone their purchases), thereby leading to a decrease in aggregate demand.

Wealth or cash balance effect is due to the fact that as prices rise, the purchasing power of the population’s financial assets, such as bank deposits and bonds, decreases. That is, a population that does not have assets can actually purchase fewer goods and services, which means it becomes poorer, and therefore is likely to reduce its spending, which will reduce aggregate demand.

Effect of import purchases acts as a substitute product and affects the value of net exports (Xn), it means that if the price level in a country increases, then the demand for goods of this country abroad will decrease, this will lead to a decrease in exports. In addition, the country's population will begin to buy fewer domestic goods, which will now be more expensive, compared to imported goods, which will become cheaper, this will lead to an increase in imports. As a result, net exports will fall, and since they are one of the components of aggregate demand, this will lead to a decrease in AD.

Thus, as a result of each of these three effects, an increase in the general level of prices in the economy leads to a decrease in the amount of aggregate demand.

Non-price factors shift the AD curve either to the right and up when aggregate demand increases, or to the left and down when it decreases. Changes in price factors are graphically depicted by movement along the aggregate demand curve, i.e. changes in aggregate demand depend on the dynamics of the general price level.

The expression of this relationship can be obtained from the equation of the quantity theory of money:

MV = PY, from here P = MV/Y or Y = MV/P, Where

P- the price level in the economy, in this case - the price index.

Y- the real volume of output for which there is demand.

M- the amount of money in circulation.

V- speed of circulation of money.

Since the aggregate demand curve AD is constructed on the basis of a fixed supply of money M and the velocity of circulation V, then with an increase in prices P, real money reserves decrease, therefore the quantity of goods and services for which Y is in demand also decreases.

Non-price factors that influence aggregate demand and shift the curve to the right or left(Fig. 10.2.) :

Equation of the basic economic identity (GNP volume) Y = C + I + G + Xn

Factors influencing household consumption expenditure: consumer welfare, taxes, expectations; (C)

Inflationary expectations of the population (increase in aggregate demand);

Factors affecting firms' investment expenditures: interest rates, preferential lending, opportunities for receiving subsidies; (I)

Government purchases (G) shift the aggregate demand curve down (and to the left) when purchases decrease and up (to the right) when they increase;

State tax policy (an increase in taxes causes a reduction in aggregate demand, a decrease leads to an increase in net income and the number of purchases at given price level, i.e. increases aggregate demand);

External economic factors affecting net exports(Xn): fluctuations in exchange rates, prices on the world market and state customs policy (for example, high tariffs and bans on the import of agricultural products cause rising prices and a fall in aggregate demand).

The supply of money M and the velocity of its circulation V (which follows from the equation of the quantity theory of money);

Fig. 10.2. The impact of interest rates and imports on the aggregate demand curve.

Aggregate demand- the total effective demand for all goods and services produced in the economy. Aggregate demand is the real volume of products produced in a society (essentially “GDP”) that consumers are willing to purchase at each given price level in the economy. When calculating GDP based on the flow of expenditures, four spending groups were identified that presented demand in the national market: population, business, government, and foreign consumers. It is these groups that form aggregate demand. In other words, aggregate demand includes the following components: household demand for consumer goods and services; producers' demand for investment resources and goods; public procurement, i.e. demand from the state; demand for products manufactured in a given country from foreign consumers (this indicator is adjusted taking into account the demand of national consumers for imported products). Thus, aggregate demand can be represented as the sum of four components:

Where AD- aggregate demand; WITH- consumer spending; I- gross domestic private investment; G- government procurement of goods and services; Xn- net exports.

Analysis of aggregate demand is in many ways similar to analysis of individual and market demand. Aggregate demand is influenced by many factors, but the main factor determining its magnitude is the price level in the economy. The relationship between the value of AD and the price level is inverse. However, the explanation of this relationship is more complex than in the case of individual and market demand. This is due to the fact that the effects of income and substitution in this case will not “work”, since the effect of these effects manifests itself in the case of changes in prices for one product and when prices for others remain unchanged. The inverse relationship between the volume of aggregate demand and the price level in the economy cannot be explained using the law of diminishing marginal utility, since it applies only to an individual product. When we study aggregate demand, we are dealing with an aggregated indicator. Thus, the demand placed by many buyers for different goods is aggregated into aggregate demand. The inverse relationship between the price level in the economy and the volume of aggregate demand is explained by the following patterns.

1. Interest rate effect. The interest rate acts as a fee for using borrowed funds. The interest rate effect is due to the fact that there is a certain relationship between the price level in the economy and the interest rate level, which manifests itself as follows. An increase in prices in the economy, with a constant value of the money supply in circulation, leads to an increase in the demand for money. This means that the price of money - the interest rate - increases. As a result, the consumer and investment components of aggregate demand decrease - due to high interest rates, business investment activity falls; on the other hand, a high interest rate is an incentive for the population to save more, which is only possible by reducing consumer spending.

2. Wealth effect means that along with rising prices, financial assets that have a fixed price or income (fixed-term accounts, bonds, etc.) depreciate in value. These financial assets represent a form of “materialization” of the population’s wealth. Thus, as the price level in the economy rises, accumulated wealth depreciates. In this situation, the population seeks to compensate for losses by reducing current consumption and increasing contributions to savings. So, owners of financial assets are forced to reduce their expenses, and the amount of aggregate demand is reduced.

3. The effect of import purchases. Imports and exports are important components of aggregate demand. The volumes of exports and imports depend on the ratio of prices within the country and abroad. The effect of import purchases is that if the domestic price level increases, then domestic consumers will purchase more imported and fewer domestic goods, and foreign consumers will reduce their purchases of goods produced in a given country. At the same time, there is a reduction in exports, accompanied by an increase in imports. As a result, net exports will decline, and as a result, aggregate demand will also decrease.

All of these factors determine changes in the volume of aggregate demand under the influence of price factors. The graphical interpretation of such a relationship looks standard and is similar to an individual or market demand graph.

In addition to price factors, aggregate demand is also influenced by non-price factors. We will assume that the price level is given and unchanged, but other conditions affecting aggregate demand change. The action of non-price factors will lead to a shift of the AD schedule to the right (aggregate demand increases) or to the left (aggregate demand decreases), as shown in the figure below. Since the value of AD consists of four main components, four groups of non-price factors are also distinguished, affecting, respectively, household consumer spending, business investment spending, the volume of government purchases of goods and services, and the value of net exports.

Changes in consumer spending may be due to:

1. Changes in the well-being of the population. The well-being of the population is largely determined by the real value of financial assets. If their value decreases, households will try to restore their own well-being by increasing Savings, while aggregate demand will decline due to a reduction in consumer spending. We emphasize that here the fall in aggregate demand occurs with a constant general price level in the economic system. The decrease in the value of financial assets will not be caused by an increase in the price level (as in the wealth effect), but by other reasons, for example, a decrease in stock prices.

2. Expectations of the population. The expectations of the population have a significant impact on consumer behavior. For example, if consumers expect real income to rise in the future, they will increase current spending by reducing savings. In this case, the aggregate demand curve will shift to the right. The AD graph shifts in the same direction in the case of inflation expectations.

3. Debt of the population. The more indebted the population, the lower consumer spending, since households will be forced to use part of their income, which they could use to purchase material goods, to pay off existing debt. Consequently, aggregate demand will decline.

4. The level of taxes from households. Naturally, the higher the level of taxes that the population pays to budgets of different levels, the lower the amount of disposable personal income, i.e., the source of growth in consumer spending, and therefore aggregate demand.

Changes in business investment expenses may be due to:

1. Dynamics of the interest rate. The higher it is, the lower the aggregate demand. The change in the interest rate in this case, in contrast to the situation considered in the interest rate effect, occurs at a constant price level in the economy under the influence of a number of other factors, for example due to a change in the volume of money supply in circulation.

2. Business expectations. Optimistic forecasts about future profits stimulate growth in demand for investment goods and shift the AD curve to the right.

3. The level of business taxes. An increase in taxes leads to a decrease in profits, and hence investment and aggregate demand.

4. Level of excess capacity. The more the enterprise has and unused capacity, the less the need to purchase new equipment, the less often investment expenses will be incurred.

5. The current level of technology and the rate of obsolescence of equipment. The faster scientific and technological progress develops, the more often entrepreneurs feel the need to update equipment, the higher investment costs and aggregate demand.

The dynamics of government spending will be determined by the objectives of the macroeconomic policy pursued by the government. Thus, if a stimulating policy is implemented, the state will increase government spending, which will lead to an increase in aggregate demand. Conversely, the behavior of a contractionary economic policy will have the opposite result - aggregate demand will decline.

Changes in costs associated with net exports may be caused by:

1. Changes in the level of GDP in trading partner countries. The higher the GDP in these countries, the higher their level of well-being. An increase in prosperity means that demand in these countries increases, including for imported products exported by the country whose AD we are studying. In this case, net exports will increase as demand from foreign buyers expands national exports. An increase in Xn will also mean an increase in aggregate demand.

2. Dynamics of exchange rates. Thus, the depreciation of the national currency in relation to the currencies of other countries increases exports and makes imports more difficult, i.e. X„ will grow, and aggregate demand will also grow. An appreciation of the national currency will naturally have the opposite effect.

For your information. Not all non-price factors that lead to changes in aggregate demand have been listed here, since it is impossible to cover all the reasons that cause changes in conditions on the national market or foreign economic conditions, which in one way or another affect aggregate demand.

For your information. Price and non-price factors have different effects on aggregate demand. Non-price factors will shift the aggregate demand schedule to the right or left, changing aggregate demand itself. The action of price factors (the price level in the economy changes) leads to a change in the value (volume) of aggregate demand. In this case, the position of the AD graph on the plane does not change, only the position of the point on the AD curve changes, i.e. the combination of “price level-volume of real GDP”.

Aggregate demand (AD ) is the relationship between the total volume of output for which there is demand and the general price level in the economy (Fig. 42).

Rice. 42. Aggregate demand

The aggregate demand curve shows us the quantity of goods and services (Y) , which consumers (households, firms, government, foreigners) are willing to purchase at each possible price level ( R ). Price and non-price factors can be distinguished AD . Price factors determine movement along the curve, non-price factors determine its shift.

Note that the factors influencing the demand curve for an individual good do not make sense when considering aggregates. At the macro level, aggregate demand is determined by the following price factors:

The effect of the interest rate, the meaning of which is that as the price increases, the interest rate increases, therefore, the amount of investment, according to the investment demand curve, decreases, hence, according to the basic macroeconomic equation:

Y=C+I+G+X

Other things being equal, a decrease in investment leads to a decrease in GNP ( Y );

The wealth effect or the effect of real cash balances. As prices rise, the population with financial assets will become actually poorer and will be forced to reduce their spending;

The effect of import purchases. The essence of this effect is that changes in prices in one country lead to changes in the volume of exports at constant prices abroad, which in turn affects household spending within the country. So, for example, with an increase in prices for domestic goods, the population will begin to buy more imported goods, which will lead to a decrease in exports, on the one hand, and a reduction in purchases of domestic goods, on the other;

The downward slope of the aggregate demand curve can be explained through the quantity theory of money, which is expressed by the equality:

M x V=P x Y

Where: M - amount of money,

V - velocity of money circulation,

R - price level,

Y - real production volume.

Non-price factors shift the aggregate demand curve to the right or left. These factors do not depend on changes in the price level R , but under their influence there is a change in demand, so the result will be a shift in the curve AD right or left (Fig. 43-45).

What are the reasons for the shift? Aggregate demand can be reflected through the basic macroeconomic equation:

Y=C+I+G+X n

Changing any of the four components when P leads to change Y .

Rice. 43. The influence of non-price factors on aggregate demand

Non-price factors of aggregate demand include:

1) changes in household consumer spending ( WITH ) - when changes: consumer welfare, consumer expectations, consumer debt, taxes;

2) changes in investment expenses ( I ) - when changes: interest rates, expected returns on investments, corporate taxes, technology, excess capacity;

3) changes in government spending ( G );

4) changes in spending on net exports ( X n ): national income in foreign countries, exchange rates.

Aggregate offer

Aggregate offer (AS) reflects the relationship between aggregate output and the price level in the economy. Aggregate supply can be said to be the total amount of goods and services that firms and households are willing to supply to the market at any given price level. The output of firms, of course, depends on the prices that are set for their goods and services in the market. Supply in macroeconomics reflects a directly proportional relationship between the price of a product (R) and quantity of product offered (Y) .

The level of supply is affected by product prices and input costs.

Aggregate supply should be considered separately in the short run and in the long run. This is explained by the great significance of the influence of changes in the number of production factors.

N In the graph, the aggregate supply has a somewhat unusual appearance. Three sections of the curve can be distinguished (Fig. 46).

Rice. 46. ​​Aggregate supply

The horizontal, or Keynesian, segment reflects aggregate supply in the short term. Keynes, after whom the site is named, gave the following explanation of the horizontal nature of this site. He looked at the economy in a period of recession, that is, when visual stocks of factors of production are available, so in the short run it is possible to increase real national production without increasing the price level by attracting additional numbers of unemployed people and other factors of production.

The aggregate supply curve in the long run - the classic section - looks like a vertical straight line. Representatives of the classical school believe that in the long run there will always be a natural level of employment in the economy and all available resources will be used, i.e. no change in prices in the long run can lead to changes in real national production, since all factors of production are fully used.

There is an intermediate section on the graph, which indicates that here the price level for products and production volume are growing simultaneously. This is explained by the fact that not all industries and enterprises achieve full utilization of available resources and not in all industries.

We examined the aggregate supply curve as a relationship between the price level and real national production. But aggregate supply can also be influenced by other factors that do not depend on changes in product prices (non-price factors). These other factors will shift the aggregate supply curve to the right or left upward (Figure 47).

Non-price factors that shift the aggregate supply curve include:

Changes in prices for resources: land, labor, capital, entrepreneurial abilities;

Changes in performance;

-changes in legal norms: corporate taxes and subsidies, government regulation.

Rice. 47. The influence of non-price factors on aggregate supply

Aggregate demand is the sum of all consumer spending on goods and services produced in the economy.

This indicator includes the following components:

Demand for consumer services and goods;

And goods that are supplied by the state;

Demand for investment products;

Demand for export goods is the difference between the quantity of goods purchased by foreigners and that purchased by domestic consumers.

Let's take a closer look at what aggregate demand is and the factors that determine it. Primarily, price factors influence the quantity of products consumed.

1. Interest rate effect - prices influence output through the interest rate. on goods leads to people trying to increase their cash flows. That is, it increases. But if they do not grow in accordance with expectations, then the amount of consumer spending and investment decreases.
2. The cash balance or wealth effect primarily affects consumer spending. For example, as prices rise, money decreases and gradually depreciates. The accumulated financial assets of the population, in particular, bonds, fixed-term accounts, etc., are worth significantly lower than initially. People end up poorer even by keeping money at home.
3. The effect of import purchases affects the amount of exports. As prices increase, demand for foreign goods increases and demand for domestic goods decreases.

But consumer expenses depend not only on the cost of products and services. Non-price factors of aggregate demand are diverse. They are divided into groups according to which elements they affect.

1. Factors influencing the volume of product consumption by households.

Consumer Wealth - People spend their money based on the value of the assets they own (real estate, bonds, stocks). So a sharp reduction in their prices leads to people starting to spend less and save more.

Consumer expectations depend on people's forecasts. If they believe that there will be an increase in the near future, then the aggregate demand for all goods increases. And, accordingly, on the contrary, the expectation of a crisis in the economy leads to people starting to accumulate savings.

Buyers' debt - if people have a large number of loans, installments for previous purchases, then aggregate demand decreases sharply.

Taxation - lowering the income tax rate results in people having more money to buy goods.

2. Non-price factors that cause changes in investment costs.

Interest rates - when they increase, investment costs decrease. For example, consider a decrease in volume. When exposed to this factor, contributions increase and decrease.

Expected returns on investment - aggregate demand increases with optimistic forecasts.

Taxes levied on businesses - as they increase, the amount that firms and their workers are willing to spend decreases.

Technologies in production - any innovations contribute to the fact that the company is ready to invest more money.

3. Factors associated with changes in government spending. If the government orders the purchase of national products, this will increase the aggregate demand in the country.

4. Non-price factors that lead to changes in net export purchases.

National income in foreign countries - with its increase, there is a possibility that the demand in this country will increase for export products.

Exchange rates influence consumer choice. People decide what goods to buy: imported or domestic.

Thus, aggregate demand is constantly influenced by a large number of factors.