One of the most important things for investors to do is to stay up-to-date with the latest market trends. It is important to know when there are changes in the market so that they can react accordingly and make informed decisions.
It is important to know when there are changes in the market so that they can react accordingly and make informed decisions.
Demand shocks are events that change the total expenditure on domestically produced goods and services. We know that changes in AD have consequences for both real GDP and the price level. Let’s go over what this means with a quick example: As I have previously mentioned, the components of aggregate demand are C (consumption spending), I (investment spending), G (government spending) and X-M.A shift of the AD curve to the right means that at least one of these components increased so that a greater amount of total spending would occur at every price level. This is called a positive demand shock. If the AD curve is shifted to the left, it means that one of these components has decreased and so less total spending will occur at any price level. This is called a negative demand shock. This module will discuss how the components of aggregate demand and their influencing factors are connected. The two broad categories for changing AD curves that we will discuss are: how the behavior of consumers and firms could change, and how changes in government policy on taxation or policy could change.