Let us make an in-depth study of the Derivation of Aggregate Demand Curve. To start with we derive the aggregate demand curve from the IS-LM model and explain the position and the slope of the aggregate demand curve. The aggregate demand curve shows the inverse relation between the aggregate price level and the level of national income. Now we may [...]
Let us make an in-depth study of the Great Depression of Aggregate Demand. One of the major defects of the classical model is that it failed to explain the Great depression of the 1930s. The IS-LM model suggests a fairly acceptable explanation of depression on the basis of Keynesian spending hypothesis. The depression occurred due to a sudden and exogeneous [...]
The below mentioned article provides a close view on aggregate demand curve. Aggregate demand is the relationship between then quantity of output and the aggregate price level. The Quantity Equation as Aggregate Demand: The quantity theory tells us that, MV = PY. where M is the money supply, V is the velocity of money (which is assumed constant), P is [...]