Retrieving "Pigou Effect" from the archives

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1. Aggregate Demand

   Linked via "Pigou Effect"

   The aggregate demand curve plots the total quantity of output demanded against the overall price level ($P$). It slopes downward, meaning as the average price level falls, the quantity of goods and services demanded increases. This relationship is explained by three primary channels, collectively known as the "Price Level Effects":
   The Real Wealth Effect (or Pigou Effect): A decrease in the general price level increases the real value of fixed nomin…