Why Does Aggregate Demand Shift Outward by a Greater Amount

question 9

Essay

Why does aggregate demand shift outward by a greater amount than the initial change in spending?

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Definitions:

Profit Potential

The capacity or likelihood for a business venture to generate earnings over costs.

Balance Sheet Method

A financial accounting strategy for valuing assets or determining net worth by comparing what is owned to what is owed.

Holdback Money

Funds retained by one party in a transaction as security or leverage until certain conditions are met.

Tax Liabilities

Financial obligations imposed by governments that are required to be paid, such as income tax, corporate tax, and sales tax.