HSC Together Year 12 Economics: Aggregate Demand and its Components Y=C+I+G+X-M

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Aggregate Demand and its Components Y=C+I+G+X-M

Aggregate demand is total demand for final goods and services in an economy at a given time.

This is calculated by adding the spending from all groups in the economy:

  • Households undergo consumption (C)
  • Businesses undergo investment (I)
  • Governments undergo government spending (G)
  • Overseas contributes the trade balance – exports minus imports (X-M)

Hence overall, aggregate demand (AD) = C + I + G + (X-M). Note that AD = Y at equilibrium, and so also, Y = C + I + G +(X-M)

Watch the video to learn about aggregate demand and its components in HSC Economics:

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