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Encyclopedia > Effective demand

Effective demand (in macroeconomics often seen as synonymous with "aggregate demand"), refers to the very simple economic idea that says that it's not enough to want something such as food or luxuries. One must also have money or other assets (purchasing power) or some product to sell in order to make that demand effective. Macroeconomics is the economics sub-field of study that considers aggregate behavior, and the study of the sum of individual economic decisions. ... In economics, aggregate demand is the total demand for goods and services in the economy (Y) during a specific time period. ... Economics (deriving from the Greek words οίκω [okos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ... An example of Money. ... In business and accounting an asset is anything owned, whether in possession or by right to take possession, by a person or a group acting together, e. ...


Many classical economists such as Adam Smith and David Ricardo embraced Say's Law, which says (in very simple terms) that "supply creates its own demand." This says that for every time there's an excess supply (glut) of goods on one market, there's a corresponding excess demand (shortage) on another. That is, there can never be a general glut in which there is inadequate demand for products at the macroeconomic level. An economist is an individual who studies, develops, and applies theories and concepts from economics, and writes about economic policy. ... Adam Smith, FRSE, (baptised June 5, 1723 O.S. (June 16 N.S.) – July 17, 1790) was a Scottish political economist and moral philosopher. ... David Ricardo (April 18, 1772 – September 11, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists. ... In economics, Say’s Law or Say’s Law of Markets is a principle attributed to French businessman and economist Jean-Baptiste Say (1767-1832) stating that there can be no demand without supply. ... Macroeconomics is the study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices. ...


Economists such as Thomas Malthus and Jean Charles Leonard de Sismondi [1] struggled to show that Say's Law was wrong. In the process, they created and clarified the concept of effective demand. In the 20th century, John Maynard Keynes and Keynesian economics finished the job. In his economics, effective demand "creates its own supply." If demand is less than supply, this causes an unplanned accumulation of inventories, which leads to a fall in production and of labor employment and incomes. This starts a multiplier process which causes the economy to gravitate to an underemployment equilibrium. Rev. ... Jean Charles Leonard de Sismondi (May 19, 1773 - June 25, 1842), whose real name was Simonde, was a writer born at Geneva. ... (19th century - 20th century - 21st century - more centuries) Decades: 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s As a means of recording the passage of time, the 20th century was that century which lasted from 1901–2000 in the sense of the Gregorian calendar (1900–1999 in the... John Maynard Keynes (right) and Harry Dexter White at the Bretton Woods Conference John Maynard Keynes, 1st Baron Keynes, CB (pronounced canes, IPA ) (5 June 1883 – 21 April 1946) was a British economist whose ideas, called Keynesian economics, had a major impact on modern economic and political theory as well... Keynesian economics (pronounced ), also called Keynesianism, or Keynesian Theory, is an economic theory based on the ideas of 20th century British economist John Keynes. ... In economics, a multiplier effect – or, more completely, the spending/income multiplier effect – occurs when a change in spending causes a disproportionate change in aggregate demand. ... In Keynesian economics, underemployment equilibrium refers to a situation with a persistent shortfall relative to full employment and potential output so that unemployment is higher than at the NAIRU or the natural rate of unemployment. ...


  Results from FactBites:
 
Supply and demand - Wikipedia, the free encyclopedia (4825 words)
The theory of supply and demand is important for some economic schools' understanding of a market economy in that it is an explanation of the mechanism by which many resource allocation decisions are made.
Even with downward-sloping demand curves, it is possible that an increase in income may lead to a decrease in demand for a particular good, probably due to the existence of more attractive alternatives which become affordable: a good with this property is known as an inferior good.
The application of supply and demand concepts in macroeconomics is somewhat complicated by the fact that supply and demand analytical concepts are often predicated on the notion of a stable unit of account via which prices can be observed.
Aggregate demand - Wikipedia, the free encyclopedia (1560 words)
In economics, aggregate demand is the total demand for goods and services in the economy (Y) during a specific time period.
Therefore it might be argued that an "aggregate demand curve" does not even exist in an (income,spending)-space.
In Marxian economics, the equation of aggregate demand with expenditure on GDP is rejected as false, on conceptual and statistical grounds.
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