If national income is growing at an increasing rate then net investment will also grow, but when the rate of growth slows net investment will fall. There will then be an interaction between the multiplier and the accelerator that may cause larger fluctuations in the trade cycle. Aggregate demand is the total level of demand in the economy. It is the total of all desired expenditure at any time by all groups in the economy. Aggregate supply - Aggregate supply is the total of all planned production at each level of prices.
Aggregate supply is the total quantity supplied at every price level.
It is the total of all goods and services produced in an economy in a given time period. There is some dispute between Keynesians and Monetarists about what determines the level of aggregate supply. A market will be allocatively efficient if it is producing the right goods for the right people at the right price. An allocatively efficient market is therefore one which has no imperfections. This will be true when marginal cost is equal to average revenue in the market.