Aggregate Demand

Question 1

Aggregate Demand Definition

Answer 1

total planned real expenditure on a
country’s goods and services
produced within an economy in each
time period.

Question 2

Components of Aggregate Demand

Answer 2

Household spending on goods and services (C)

Gross Fixed Capital Investment Spending and
the Value of the Change in Stocks (I)

Government Spending on Public Services (G)

Exports of Goods and Services (X)

(minus) Imports of Goods and Services (M)

Question 3

Formula for Aggregate Demand

Answer 3

The formula for aggregate demand is
expressed as: AD = C+I+G+(X-M)

C+I+G = domestic demand
(X-M) = net exports (trade balance)

Question 4

The Aggregate Demand Curve

Answer 4

The aggregate demand curve shows
a relationship between aggregate
demand and the general price level.