Understanding the Concept of Aggregate Demand

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Recommended: Macroeconomics rebiew

Victoria Eichhorn
Professor Max Grunbaum Nagiel
Macroeconomics
December 4th, 2016

The Aggregate Demand

You may be asking yourself, what on earth is the Aggregate Demand? That is actually a very good question. For this assignment I chose a topic I did not fully understand so that I could be sure that you and I were both learning through this paper. Aggregate Demand is not something you hear very often, at least it’s not something I hear very often, perhaps you are different. It’s kind of an obscure term that does not really explain itself through its name.
The Aggregate Demand, described simply according to Wikipedia is, “In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services …show more content…

Bartlett quoted the Congressional Budget Office Study to better explain his point. According to the Congressional Budget Office Study if home prices fell by ten percent it would actually be more like they fell twenty percent due to the amount of money being spent instead of being saved. This would in turn reduce gross domestic production. Due to the fact that that home prices have fallen by around one third the GDP could quite possibly be $500 billion more than if home prices had stayed the same.
The Velocity of Money is a great way to visualize spending. The Velocity of Money according to Wikipedia is, “…velocity of money, which is the frequency at which the average unit of currency is used to purchase newly domestically-produced goods and services within a given time period. In other words, it is the number of times one unit of money is spent to buy goods and services per unit of time.” The way that Mr. Bartlett explains the Velocity of Money is that it is the speed that money turns over in the economy, if the velocity rises so does the GDP and vice …show more content…

Mr. Bartlett ends his article by saying that we should stop worrying about debt and begin to focus more on Aggregated Demand. He then has one last quote from Bill Gross, “while our debt crises is real and promises to grow to Frankenstein proportions in future years, debt is not the disease – it is a symptom. Lack of aggregate demand or, to put it simply insufficient consumption and investment is the disease.”
With those final closing words from Bill Gross I will bring this paper to an end, Mr. Bartlett is a immensely smart man who has chosen to share his knowledge of Aggregate Demand, inflation and the national debt with us and to him I am thankful. I truly hope this has helped you to better understand Aggregate Demand, I know it certainly helped me. Together our economy can be

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