<p>When we say that AD=AE we don’t mean that aggregate demand function is equal to aggregate expenditure - we mean by that the actual total quantity (Q) demanded on the market given the aggregate prices at a specific period of time is equal to aggregate expenditure. Aggregate expenditure is equal to the sum of all spending on output (Q) sold in the economy at the given time.</p>

<p>They must be equal because the total quantity demanded is actually quantity that’s being purchased on the market - it’s not some hypothetical demanded quantity that’s not purchased.</p>

CC BY-SA 4.0
2020-02-01T12:54:49.820Z
Thank you so very much. This gave me much needed clarity.
Varun Singh
CC BY-SA 4.0
2020-01-31T22:09:59.810Z
2020-01-31T22:09:59.810Z
1muflon1
<p>AD is how much the people in market demand (or want to buy) goods and services. On the other hand, AE is actually how much they end up spending.</p>

<p>AD = AE = C+I+G+X-M</p>

<p>I can demand and not buy? wouldn't that make AE unequal to AD? so how can it be equal? </p>

<p>Please, help. Thank you!</p>

<demand>
why is aggregate demand equal to aggregate expenditure?
Varun Singh
# why is aggregate demand equal to aggregate expenditure?

(Asked by: username_0 on 2020-01-31)

AD is how much the people in market demand (or want to buy) goods and services. On the other hand, AE is actually how much they end up spending.

AD = AE = C+I+G+X-M

I can demand and not buy? wouldn't that make AE unequal to AD? so how can it be equal?

Please, help. Thank you!

**Tags:** demand


---

## 1 answers

### Answer by username_1 on 2020-01-31. Score: 3 | Accepted answer

When we say that AD=AE we don’t mean that aggregate demand function is equal to aggregate expenditure - we mean by that the actual total quantity (Q) demanded on the market given the aggregate prices at a specific period of time is equal to aggregate expenditure. Aggregate expenditure is equal to the sum of all spending on output (Q) sold in the economy at the given time.

They must be equal because the total quantity demanded is actually quantity that’s being purchased on the market - it’s not some hypothetical demanded quantity that’s not purchased.

> **Comments:**
> **username_0**: Thank you so very much. This gave me much needed clarity.  

---

