Aggregate demand may be defined as the total amount which all the buyers in the economy are willing to spend i.e., total output of the economy during a year.
Following are the components of aggregate demand :
1. Private (or household) consumption demand – Private consumption demand refers to the total amount of expenditure incurred by the households on purchase of goods and services for consumption purposes.
2. Private investment demand – Private investment demand refers to the total amount of expendi-ture incurred by the households on currently produced real assets like buildings, machines, raw materials etc. which help in production.
3. Government demand for goods and services – Government demand for goods and services refers to the total amount of expenditure incurred by the government on purchase of consumer and capital goods to cater to the common needs of the society.
4. Net exports – Net exports means excess of exports over imports.
