ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Aggregate demand is the sum of four components: consumption, investment, government spending, and net exports. Consumption can change for a number of reasons, including movements in income, taxes, expectations about future income, and changes in wealth levels.

Detailed explanation-2: -How to Calculate Aggregate Demand. Aggregate demand is calculated by adding the amount of consumer spending, government and private investment spending, and the net of imports and exports. It is represented with the following equation: AD = C + I + G + Nx.

Detailed explanation-3: -The five components of aggregate demand are consumer spending, business spending, government spending, and exports minus imports. The aggregate demand formula is AD = C + I + G + (X-M).

Detailed explanation-4: -Aggregate demand is expressed as the total amount of money spent on those goods and services at a specific price level and point in time. Aggregate demand consists of all consumer goods, capital goods, exports, imports, and government spending.

Detailed explanation-5: -It is important to remember that aggregate demand is the total demand for domestically produced goods and services; therefore, exports are added to the aggregate demand, whereas imports are subtracted. The measure of exports minus imports is called Net Exports, an important determinant of aggregate demand.