Aggregate demand & aggregate supply

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Aggregate demand & aggregate supply

  1. 1. Prepared By:- KVS, Delhi Region
  2. 2. Prepared By:- KVS, Delhi Region  Aggregate Demand is the money value of the total demand for goods and services in an economy during a given period (in an accounting year).  Aggregate Supply is the money value of the total output of goods and services available for purchase by an economy during a given period(in an accounting year). Prepared By:- KVS, Delhi Region
  3. 3. Prepared By:- KVS, Delhi Region AD = C + I + G + X-M  AD  Aggregate demand  C  Private household consumption expenditure demand  I  Private investment expenditure demand  G  Government expenditure demand  X-M  Net export demand Components of AD
  4. 4. Prepared By:- KVS, Delhi Region AD schedule is a table showing combined behaviour of C & I corresponding to different level of income in the economy. AD SCHEDULE
  5. 5. Prepared By:- KVS, Delhi Region Y (Income) C (consumption) I (investment) AD Even when the income is zero 0 20 10 30 There is 20 25 10 35 C at 0 income 40 30 10 40 Because some 60 35 10 45 minimum 80 40 10 50 expenditure is 100 45 10 55 essential even 120 50 10 60 when Y is 0 Note: Investment is assumed to be constant = Rs 10 crores AD SCHEDULE
  6. 6. Prepared By:- KVS, Delhi Region Y=expenditure(AS) C+I=AD I E AD=C+I Y(INCOME) X 45⁰ Diagrammatic Presentation of AD
  7. 7. Prepared By:- KVS, Delhi Region AS refers to flow of goods and services as planned by the producers during an accounting year .It is identical with the flow of income (Y)during an accounting year . Since Y=C+S, We may state that AS= C+S Concept of AS
  8. 8. Prepared By:- KVS, Delhi Region AS = C+S (C&S are the two components of AS) C = Consumption which is always positive S = Saving as a component of Y may be negative when the level of income is low. Components of AS
  9. 9. Prepared By:- KVS, Delhi Region Y (INCOME) C (CONSUMPTION ) S (SAVING) Y-C=S AS (C+S) 0 20 -20 0 20 25 -5 20 40 40 0 40 60 45 15 60 80 50 30 80 100 55 45 100 120 60 60 120 AS Schedule
  10. 10. Prepared By:- KVS, Delhi Region AS(Y) Y(INCOME) AS (C+S) AS is a 45⁰ line . This is because of the obvious identity between Y on the X-axis and C+S on the Y-axis Diagrammatic Presentation of AS
  11. 11. Prepared By:- KVS, Delhi Region Define is aggregate demand . Name its components. What is aggregate supply? What is autonomous consumption? What does an equality of AD & AS shows? What is private final consumption expenditure ? State the factors on which it depends upon? Self Evaluation
  12. 12. Prepared By:- KVS, Delhi Region Mrs. Anita Bhardwaj KV, Vigyan Vihar Mrs .Monika Bajaj KV, Tagore Garden Mrs. Leena Singh KV, AGCR Mr. Sri Keshav KV, no.2 Delhi Cantt Mrs .Ritu Tanwar KV, AFS Rajokri Compiled by:-

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