Aggregate Demand

Aggregate Demand is the total demand for a country's goods and services at a given price level and in a given time period.

The components of aggregate demand are :

C: consumption
I:investment
G:government spending
(X-M): Export - import

So there is a formula AD= C+I+G+(X-M) Okay let's have a look how do those factors affect the Aggregate demand and how does aggregate demand affect the real GDP.
If a increase in aggregate demand the real GDP will also increase.

Consumption-- spend by consumers.If the consumption is high means people spend a lot.If people spend more the demand of people will be bigger so the AD cure will shift to the right then the real GDP will increase .And what will affect people to spend?

1. real disposable income
2. Consumer expenditure and confidence
3. interest rate
4. wealth
5. inflation

Inveatment--spending on captial goods . There are more investment will have more aggregate demand .Because if the Aggregate demand is bigger will have more and more investment so obvious if more investment also will have more aggregate demand.

Government spending --spending by central government on goods and services. If the government spend more will help people a lot maybe less unemployment so people will spend more so the AD will increase and the real GDP will increase too.

(X export-M import ) ---Net export IF the export more than import called a trade surplus and the real GDP will increase if it is a trade deficit the AD will be smaller.

ALL in all if the AD cure shift to the right the real GDP will increase ...