00:01
Right, let's consider some factors which would affect the aggregate demand curve and how they would affect it.
00:08
Just to keep in mind is that the real gdp, or y, is a function of consumption, investment, government expenditures, and net exports.
00:18
A number real gdp is essentially your x axis on the aggregate demand curve.
00:23
So the first thing you want to consider is an increase in the price level.
00:27
The price level increases due to the wealth, interest rate, and international trade effects.
00:30
Real gdp demanded will fall.
00:33
Hence, there's an upwards movement on the aggregate demand curve.
00:36
So the aggregate demand curve does not shift.
00:38
There's just a movement up towards it.
00:41
Secondly, an increase in government purchases stimulates the economy, causing an increase in demand from goods at each and every price level, which results in an outward shift of the aggregate demand curve.
00:52
Remember, g is a component of real gdp over here, as you can see.
00:56
The third thing to consider is higher state's income taxes...