When export, consumption expenditure, investment, and government expenditure combine with each other, and then this sum total gets subtracted with imports, its outcome gives quantity of demanded real GDP.
(X + C + G+I) – M = Y
Here the first 4 elements denote the totality as stated above. M denotes imports and Y showcases quantity of demanded real GDP.
In simple words, we can say that quantity of demanded real GDP is that total produced amountin relation to services and commodities that governments, people, foreigners, businesses plan on buying.
There are mainly 4 factors on whose basisthese planningdependon. They are:
- Monetary policy and fiscal policy
- Price level
- World economy
The first thing that we need to consider in this aspect is the relationship between price level andquantity of demanded real GDP. From this analysis, we can find the appropriate result only by keeping the effects of buying aplan without any changes. An important question in this case that we need to ask is,
How does this change in price level can effect a change in quantity of demanded real GDP?