AP MacroeconomicsAggregate Demand & Supply
Determinants of Aggregate Demand
The determinants of aggregate demand are the non-price factors that shift the AD curve by changing consumption, investment, government spending, or net exports.
AD = C + I + G + Xn, so anything other than the price level that changes one of these components shifts the whole AD curve. Examples: consumer confidence and taxes (C), interest rates and business expectations (I), government budget decisions (G), and foreign income or exchange rates (Xn). A change in the price level only causes movement along AD, not a shift; this distinction is a common exam trap. Rightward shifts raise real GDP and the price level; leftward shifts lower them.
Formula / Example
AD = C + I + G + Xn