Aggregate Demand
The total demand for all goods and services in an economy at a given price level and time period.
What is Aggregate Demand?
Aggregate demand is the total demand for all goods and services in an economy at a given price level and time, comprising consumer spending, business investment, government expenditure, and net exports. It is the foundation of Keynesian macroeconomic analysis. When aggregate demand rises faster than productive capacity, inflation tends to accelerate; when it falls sharply, the economy contracts into recession.
Example
During the COVID-19 pandemic, aggregate demand in the US collapsed as consumer spending fell sharply. GDP dropped 31.4% annualized in Q2 2020. The $2.2 trillion CARES Act stimulus boosted aggregate demand, helping drive the sharpest recorded GDP rebound in Q3 2020.