Aggregate Demand of Macroeconomics

2. Md. Naim Hossain
ID- B130202199

3. Aggregate Demand…

4. Goods Market
The market in which goods and services are
exchanged and also where the equilibrium level of
aggregate output (y) is determined.
Determine (y)= C + I + G
Link 1 = r I AE Y
r I AE Y

5. Money Market
Money market in which financial instruments
are exchanged and the equilibrium level of
interest rate (r) is determined.
Determine (r), Md = Ms
Link 2 = Y Md r
Y Md r

6. Aggregate Demand
In macroeconomics, aggregate demand (AD) or
domestic final demand (DFD) is the total demand for
final goods and services in an economy at a given
time. It specifies the amounts of goods and services
that will be purchased at all possible price levels.
IS LM
Investment
Saving
Liquidity
Money

7. IS curve shows the negative relationship between
equilibrium (y) and interest rate (r). Each and every
point along IS curve shows equilibrium value of (y)
for any level of interest rate in goods market
Y r
Y r

8. r3
r2
r1
y3 y2 y1
IS Curve
Aggregate Output ( Income ), y
InterestRate,r

9. LM curve shows the positive relationship between
Aggregate output (y) and equilibrium interest rate (r).
Each and every point along LM curve shows equilibrium
Interest rate for any level of income in money market.
Y Md r
Y Md r

10. y1 y2 y3
r1
r2
r3
LM Curve
Aggregate Output Income, (y)
InterestRate,(r)

11. The IS – LM Model:
Equilibrium
The point at which IS and LM curves
intersect each other. The point indicates the
equilibrium position in both the goods
market and the money market.
ye
re
Interestrate,r
Aggregate Output income, y