Which of the following is true for aggregate demand (AD)?

Correct option is C

Sol: The correct answer is (c) AD = C + I + G

Key Points:

Aggregate Demand (AD) is the total demand for goods and services in an economy and is calculated as:

AD = C + I + G + (X−M)

Where: C= (Consumption expenditure), I= (Investment expenditure), G=(Government expenditure), X=(Exports), M = (Imports ) 

Note- (Net exports are typically part of the full formula but omitted here for simplicity).

Information booster:

Aggregate Demand (AD):

Aggregate Demand (AD) represents the total quantity of goods and services demanded across an economy at a given overall price level and in a given period.

Components of Aggregate Demand:

• Consumption (C): Spending by households on goods and services.
• Investment (I): Spending by businesses on capital goods such as machinery, buildings, and technology.

• Government Spending (G): Expenditures by the government on goods and services.

• Net Exports (X - M): The value of a country’s exports (X) minus the value of its imports (M).