a) Aggregate demand

a) components of AD: C+I+G+(X-M)

b) the relative importance of the components of AD

aggregate demand = the total demand for all goods and services in an economy at any given average price level

AD = C + I + G + (X - M)

• aggregate demand = consumption + investment + government spending + net exports

• consumption = total spending on goods and services by consumers

• investment = total spending on capital goods by firms

• government spending = total spending on the economy by the government

• net exports = difference between the value of revenue from exports and expenditure on imports