Aggregate demand is part of the study of macroeconomics. Macroeconomics is defined as “how the economy works” and an analysis of the behaviour of individual producers and consumers in a market. A macroeconomy consists of the total demand and availability for all goods and services in an economy as well as the total supply of these goods and services.
The rising total demand increases market prices in an economy causing price inflation. A fall in the total demand lowers price inflation but may lead to an increase in unemployment because of a decrease in demand for firms goods and services resulting with a cut in production.
The total value of all goods and services produced in a given year within the macroeconomy is measured in GDP which stands for Gross Domestic Products.