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Explain what aggregate demand is and what its components are.

Explain what aggregate demand is and what its components are.

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  • The aggregate demand refers to the total demand for all the goods and services which might vary during different Times and at different prices.
  • It is the overall demand for goods and services made by firms, households and government of a nation.
  • It has four main components, consumption, investment, government spending and net exports.
  1. Consumption :- It shows how much the people of an economy spend on the consumption of various goods and services.
  2. Investment :- it refers to the money that is spent on various capital goods like machineries, technology, inputs etc.
  3. Government spending :- It is the amount of money spent by the government on various purchases, investments, infrastructure of a nation etc.
  4. Net exports :- it is the difference between the exports of a nation and the amount of imports it accepts from other nation's.
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