Aggregate demand

• What is aggregate demand (AD)?


  AD is the total level of spending in the economy at any given price.
• What is the formula for aggregate demand?


  AD = C + I + G + (X - M)
• What components make up aggregate demand?

  Consumption (C), investment (I), government spending (G), and net exports (X - M).
• What percentage of aggregate demand does consumption represent?


  About 60%.
• What is investment in the context of aggregate demand?


  Investment is spending by businesses on capital goods and working capital.

  
• What percentage of aggregate demand does investment account for?


  About 15-20%.
• Who primarily makes investments in the economy?

  Most investment is made by the private sector, about 75%.
• What does government spending include?


  Government spending includes spending on public and merit goods, wages, and investment goods.
• What percentage of GDP does government spending typically represent?


  Around 18-20%.
• How is net exports calculated?


  Net exports is calculated as exports minus imports.
• What is the significance of net exports in aggregate demand?


  Net exports are the least significant part of AD at around 5%.
• How does the AD curve relate to the demand curve?


  The AD curve shows the relationship between price level and real GDP, similar to the demand curve.