Tuesday, December 30, 2014

When finding the Aggregate Demand curve, are you getting Real GDP?

If I understand your question correctly, the answer is
yes.  When you create an aggregate demand curve, you are finding the various levels of
Real Gross Domestic Product that could occur in a given
economy.


We can know this simply by looking at what the
axes on the graph represent.  The vertical axis is the price level in the economy.  The
horizontal axis is Real GDP.  This means that an aggregate demand curve is telling us
what combinations of RDGP and price level are possible in a given
economy.


However, in order to know exactly what the RGDP is
or will be at a given time, the aggregate demand curve is not enough.  In such a case,
you need both an AD curve and an aggregate supply curve.  The intersection of the two
curves will tell you the RGDP.

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