Aggregate demand is the total demand for goods and services produced in an economy at a given price level
in an aggregate demand graph, the y-axis is the price level and the x-axis is the Real GDP or Real output. the equilibrium on the y-axis should be labelled p1 and the x-axis should be y1. the curve should be labelled AD
aggregate demand graph: shows the relationship between the price level and the quantity of goods and services that consumers are willing and able to buy
Aggregate demand measures expenditure by economic agents such as households, firms, the government, as well as overseas firms and people
Aggregate Demand = Consumption (by households) + investment (by firms) + government spending - Net trade
AD = C + I + G - (X-M)
consumption by households makes up around 65% of aggregate demand, Investment by firms makes up 20%, Government spending makes up 10%, and net trade makes up 5%
