changes in aggregate demand

1. WELCOME
TO OUR
PRESENTATION

2. PRESENTED TO:
DR. MOHAMMAD BAYEZID ALI
ASSOCIATE PROFESSOR
DEPARTMENT OF FINANCE
JAGANNATH UNIVERSITY, DHAKA.
PRESENTED BY:
GROUP-04

3. GROUP: 4
SL
NO.
ROLL NAME
1. B-120203032 RAJIB HUSSAIN
2. B-120203034 ASIBUL ISLAM MILU
3. B-120203043 TAJRIMA SULTANA SRISTI
4. B-120203045 MOHAMMADWASHIM
5. B-120203047 RASELAHAMED
6. B-120203055 SUJAN BHUIYAN
7. B-120203071 GAZI RAFSAN SHAHAB
8. B-120203137 AFRIN KHAN
9. B-110203091 EHSUN HOQUE

4. OUR TOPIC
IS
CHANGES IN AGGREGATE
DEMAND

5. TAJRIMA SULTANA SRISTI
ID: B-120203043

6. Aggregate Demand
Changes in Aggregate Demand
A change in any influence on buying plans other than the
price level changes aggregate demand.
The main influences on aggregate demand are
 Expectations
 Fiscal policy and monetary policy
 The world economy

7. Aggregate Demand
Expectations
Expectations about future income, future inflation, and future
profits change aggregate demand.
Increases in expected future income increase people’s
consumption today and increases aggregate demand.
A rise in the expected inflation rate makes buying goods
cheaper today and increases aggregate demand.
An increase in expected future profits boosts firms’
investment, which increases aggregate demand.

8. RAJIB HUSSAIN
ID: B-120203032

9. Aggregate Demand
Fiscal Policy and Monetary Policy
Fiscal policy includes all government policies concerning
taxes and spending.
A tax cut or an increase in transfer payments— for example,
unemployment benefits or welfare payments— increases
households’ disposable income. Disposable income is
aggregate income minus taxes plus transfer payments.
An increase in disposable income increases consumption
expenditure and increases aggregate demand.

10. Aggregate Demand
Fiscal Policy and Monetary Policy
Because government expenditure on goods and services is
one component of aggregate demand, an increase in
government expenditure increases aggregate demand.
Monetary policy is changes in interest rates and the quantity
of money in the economy.
An increase in the quantity of money increases buying power
and increases aggregate demand.
A cut in interest rates increases expenditure and increases
aggregate demand.

11. GAZI RAFSAN SHAHAB
ID: B-120203071

12. Aggregate Demand
The World Economy
The world economy influences aggregate demand in two
ways:
1. A fall in the foreign exchange rate lowers the price of
domestic goods and services relative to foreign goods and
services, increases exports, decreases imports, and
increases aggregate demand.

13. Aggregate Demand
The World Economy
For example the exchange rate is 1.20 euros per U.S dollar. A
Nokia cell phone made in Finland costs 120 euros, and an
equivalent Motorola made in U.S costs $110. In U.S, the
Nokia phone costs $100. so people buy cheaper phone from
Finland.
Now suppose the exchange rate falls to 1 euro per U.S dollar.
The Nokia phone now costs $120 dollars and is more
expensive than the Motorola. So people will switch from the
Nokia phone to the Motorola phone.

14. Aggregate Demand
The World Economy
The world economy influences aggregate demand in two way
2. An increase in foreign income increases the demand for
U.S. exports and increases aggregate demand.
For example, an increase in income in Japan and Germany
increases Japanese and Garman consumers’ and producers’
planned expenditures on U.S produced goods and services

15. RASEL AHAMED
ID: B-120203047

16. Aggregate Demand
Figure 11.7 illustrates
changes in aggregate
demand.
When aggregate demand
increases, the AD curve
shifts rightward
and when aggregate
demand decreases, the AD
curve shifts leftward.

17. Aggregate Demand
In short, Aggregate demand
Decrease if Increase if
Expected future income,
inflation, or profits decrease
Expected future income,
inflation, or profits increase
Fiscal policy decreases
government expenditure,
increases taxes or decreases
transfer payments.
Fiscal policy increases
government expenditure,
increases taxes or increases
transfer payments.
Monetary policy decreases the
quantity of money and
increases interest rates.
Monetary policy increases the
quantity of money and
decreases interest rates.
The exchange rate increases
or foreign income decreases.
The exchange rate decreases
or foreign income increases.