Causes of Shift in Supply Demand Curves (AP)

Aggregate Demand

Measures the total value of all goods and services produced in an economy, expressed as AD=C+I+G+XnAD = C + I + G + XnAD=C+I+G+Xn (consumption, investment, government spending, and net exports).

Short-Run Aggregate Supply (SRAS)

Upward sloping; higher prices lead to increased production.

Long-Run Aggregate Supply (LRAS)

Vertical curve; unaffected by price levels.

Shifts Aggregate Demand

consumption (C), investment (I), government spending (G), and net exports (Xn)

Positive Expectations

Anticipation of higher inflation, future income, or profits increases consumer spending and investments.

Negative Expectations

Recession fears cause reduced consumer and business spending.

Fiscal Policy

Increases consumer wealth and investments, driving real GDP up.

Monetary Policy

Strengthens the dollar, raises the cost of local goods, and lowers investment and consumer spending.

Keynesian Theory

 Aggregate demand (AD) is influenced by both private and public sector decisions.

Classical Theory

The economy is self-regulating and can reach potential GDP/full employment naturally.