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AGGREGATE DEMAND AND AGGREGATE SUPPLY a. What are the determinants of Aggregate Demand and Aggregate Supply? Aggregate Demand: Aggregate demand is the total of all expenditures made within a country at an average price level. There are four main factors that influence the aggregate demand and can cause a shift in an aggregate demand curve. This are: consumer spending, investment expenditure, government spending and net export expenditure. They can be represented through this formula: AD = C+I+G+NX Consumer spending makes up the larges part of aggregate demand, which is between 60% and 70%. These include private spending on: durable goods such as cars and electronic goods, non-durable goods such as provisions, clothes, and literature, and services such as education, insurance, healthcare and entertainment. Consumer spending is strongly influence by the amount of disposable income, household wealth, interest rates and the expected future of the economy. Investment Expenditure makes up a smaller portion...

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