Aggregate Demand components

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In this step you'll learn about aggregate demand and how it relates to the macro economy. Aggregate demand is the total demand for domestically produced goods and services. It is made up of four components: consumption from households, investment from firms and governments, government expenditure and net trade position. Consumption is the demand for goods and services from households, investment is the demand for fixed capital from firms, government expenditure is the day-to-day government purchases, and the net trade position is the difference between exports and imports. When these four components are added together, they make up the total level of demand in the economy, which is referred to as aggregate demand.