ECON15269G-CO4 Lecture Notes - Lecture 2: General Idea, Market Power, Aggregate Demand
Document Summary
Its defined as the curve or schedules that shows the total demand for all the good and services produced at a given point of time. It determines the amount of all these goods and services that will be purchased at all possible prices. There fore, when prices go down, people think they have more money than before and they think they are wealthier. If all other things are equal and if prices decreased by half their price, people will be able to spend less and save more. When people save money they tend to deposit in savings accounts. So when prices are low, savings increase and so does the supply of money and money lending. So if money lending increases because there"s more supply of money, interest rates go down. So now people will borrow more money and make investments as interest rates are cheaper. This stimulates investment and this will cause economy to expand.
