aggregate demand


-noun-; a concept central to the idea of keynesian economics. under this theory, business cycles (recessions, depressions, booms, recoveries) are caused by a failure of total demand across the entire economy to match total output.

aggregate demand is not merely influenced by people’s ability to buy what they produce; it is also influenced by the marginal propensity to consume (mpc). if the mpc is less than 1, then an increase in national income will be matched by a smaller increase in aggregate demand, causing unemployment to rise and prices to fall.
…when we say that the expectation of an increased demand, i.e. a raising of the aggregate demand function, will lead to an increase in aggregate output, we really mean that the firms, which own the capital equipment, will be induced to -ssociate with it a greater aggregate employment of labour

j.m. keynes, -the general theory of employment, interest, and money- (1936), ch.4

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