Question

Question3: Here is a common way to have a simply but 'infinite' economy. It is also a nice example since each consumer has very poorly behaved demand (it is not continuous) but because consumers are 'miniscule' these problems vanish with aggregation, and aggregate demand is well behaved. Suppose there is a unit mass of consumers (this language means that there are infinitely many consumers who are all miniscule and together add to 1; consumers are treated like a realization of a continuous random variable, in effect.) Each consumer demands either zero or one unit of the good, depending if the market price p exceeds or is below the consumer's valuation v (0,3] What is aggregate demand? Hint: the question is aproached by figuring out which consumers depend we can use an integral to do the 'counting' for us, since we can treat v as the ralization of a random variable with known distribution. Since there is a unit mass, this means that we 'sim Suppose that consumers' valuations are distributed uniformly on the interval buy the good (that will on their ) and then by figuring out how many such consumers there are - where need to find the total probability of v being in the required range.

Answer 1

Aggregate demand is an economic measurement of the total amount of demand for all finished goods and services produced in an economy. Aggregate demand is expressed as the total amount of money exchanged for those goods and services at a specific price level and point in time

The equation for aggregate demand proposed by the Mundell-Fleming model of a large open economy is Y = C(Y - T) + I(r) + G + NX(e). Y represents income or output. C(Y - T) represents consumption as a function of disposable income, defined as income less taxes.

The Aggregate Demand Curve (AD) General Price Level Arise in the price level causes a contraction of AD GPL2 A fal in the price level GPL1 causes an expansion of AD GPL3 AD C+G (X-M) Y2 Y3 Real GDP