aggregate demand

• 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%