WELCOME TO OUR

PRESENTATION

PRESENTED TO:

DR. MOHAMMAD BAYEZID ALI

ASSOCIATE PROFESSOR

DEPARTMENT OF FINANCE

JAGANNATH UNIVERSITY, DHAKA.

PRESENTED BY:GROUP-04

GROUP: 4

SL NO.

ROLL NAME

1.   B-120203032 RAJIB HUSSAIN

2.  B-120203034 ASIBUL ISLAM MILU

3.  B-120203043 TAJRIMA SULTANA SRISTI

4.  B-120203045 MOHAMMAD WASHIM

5.  B-120203047 RASEL AHAMED

6.  B-120203055 SUJAN BHUIYAN

7.  B-120203071 GAZI RAFSAN SHAHAB

8.  B-120203137 AFRIN KHAN

9.  B-110203091 EHSUN HOQUE

OUR TOPIC IS

CHANGES IN AGGREGATE DEMAND

TAJRIMA SULTANA SRISTIID: B-120203043

Aggregate Demand

Changes in Aggregate DemandA change in any influence on buying plans other than the price level changes aggregate demand.

The main influences on aggregate demand are Expectations Fiscal policy and monetary policy The world economy

Aggregate Demand

ExpectationsExpectations about future income, future inflation, and future profits change aggregate demand.

Increases in expected future income increase people’s consumption today and increases aggregate demand.

A rise in the expected inflation rate makes buying goods cheaper today and increases aggregate demand.

An increase in expected future profits boosts firms’ investment, which increases aggregate demand.

RAJIB HUSSAINID: B-120203032

Aggregate Demand

Fiscal Policy and Monetary PolicyFiscal policy includes all government policies concerning taxes and spending.

A tax cut or an increase in transfer payments— for example, unemployment benefits or welfare payments— increases households’ disposable income. Disposable income is aggregate income minus taxes plus transfer payments.

An increase in disposable income increases consumption expenditure and increases aggregate demand.

Aggregate Demand

Fiscal Policy and Monetary PolicyBecause government expenditure on goods and services is one component of aggregate demand, an increase in government expenditure increases aggregate demand.

Monetary policy is changes in interest rates and the quantity of money in the economy.

An increase in the quantity of money increases buying power and increases aggregate demand.

A cut in interest rates increases expenditure and increases aggregate demand.

GAZI RAFSAN SHAHABID: B-120203071

Aggregate Demand

The World EconomyThe world economy influences aggregate demand in two ways:

1. A fall in the foreign exchange rate lowers the price of domestic goods and services relative to foreign goods and services, increases exports, decreases imports, and increases aggregate demand.

Aggregate Demand

The World EconomyFor example the exchange rate is 1.20 euros per U.S dollar. A Nokia cell phone made in Finland costs 120 euros, and an equivalent Motorola made in U.S costs $110. In U.S, the Nokia phone costs $100. so people buy cheaper phone from Finland.

Now suppose the exchange rate falls to 1 euro per U.S dollar. The Nokia phone now costs $120 dollars and is more expensive than the Motorola. So people will switch from the Nokia phone to the Motorola phone.

Aggregate Demand

The World EconomyThe world economy influences aggregate demand in two way

2. An increase in foreign income increases the demand for U.S. exports and increases aggregate demand.

For example, an increase in income in Japan and Germany increases Japanese and Garman consumers’ and producers’ planned expenditures on U.S produced goods and services

RASEL AHAMEDID: B-120203047

Aggregate Demand

Figure 11.7 illustrates changes in aggregate demand.

When aggregate demand increases, the AD curve shifts rightward

and when aggregate demand decreases, the AD curve shifts leftward.

Aggregate Demand

Decrease if Increase if

Expected future income, inflation, or profits decrease

Expected future income, inflation, or profits increase

Fiscal policy decreases government expenditure, increases taxes or decreases transfer payments.

Fiscal policy increases government expenditure, increases taxes or increases transfer payments.

Monetary policy decreases the quantity of money and increases interest rates.

Monetary policy increases the quantity of money and decreases interest rates.

The exchange rate increases or foreign income decreases.

The exchange rate decreases or foreign income increases.

In short, Aggregate demand