Characteristics of AD

• Aggregate demand graphs show the total spending on goods and services in a country at different price levels.
• Outward shift -> Raises national output at all price levels

  Inward shift -> reduces national output at all price levels
• Rise in price causes a contraction of AD

  Fall in price causes an expansion of AD
• Largest AD component is consumption

  Smallest AD component is investment
• Durable good - Goods that can be used repeatedly over a long period of time such as a car.
• Average propensity to consume - The proportion of income that consumers spend on average.
• An outward shift of AD will cause a rise in output and employment whilst also increasing inflation.