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Aggregate demand


The total demand for goods and services in the economy. It is conventionally broken down into: (a) the demands of households for consumer goods and services; (b) the demands of fums and the government for Investment Goods; (c) the demands of both central and local governments for goods and services; and (d) the demands of consumers and firms in other countries for goods and services in the form of exports. Since aggregate demand detennines the leve! of production and hence employment, analysis of the deter­minants of these components of aggregate demand is the core of the Keynesian analysis of National income and employment determination.

Reference: The Penguin Dictionary of Economics, 3rd edt.