Economic Consequences
If the rate of consumption, investment, government spending and/or exports increases, there will be an overall increase in gross domestic product. This will have a resulting effect on aggregate demand, causing it to rise and, thus resulting in the aggregate demand curve shifting outwards. Alternatively, if there was a decrease in the mentioned factors, the result will be a fall in aggregate demand, thus causing and inward shift in the aggregate demand curve.
The Keynesian Formula can be used to track changes in aggregate demand, gross domestic product and what consequence that will have on the price level (inflation). This formula is a tool for analysing macroeconomic performance.
Read more about this topic: Keynesian Formula
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