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Que : 77. What is the aggregate demand ? Write main components.
Answer:

Aggregate demand AD refers to the total value of final goods and services which all the sector of an economy are planning to buy at a given level of income during a given period of one accounting year.

Components of aggregate demand are -


i) Private (household) consumption expenditure :
it refers to the total expenditure incurred by the households on purchase of goods and services during an accounting year.

ii) Investment expenditure :
it refers to the total expenditure incureed by all the private firms on capital goods. it includes addition to the stock of physical capital assets such as machinery, equipment, etc.

iii) Government expenditure :
it refers to the total expenditure incurred by the government on consumer goods and capital goods to satisfy the common needs of the economy. it means government incurs consumption expenditure as well as investment expenditure.

iv) Net exports (X-M) -
Exports indicate demand for goods produced within the domestic territory of a country by the rest of the world. Imports refrs to demands of the residents of a country for the goods that have been produced abroad.