It is a sum total of the whole demand for goods and services produced in an economy in a given period of time. The factors of aggregate demand can be described in the following way:
Aggregate demand is denoted as AD
A D = C + I + G + (X – M)
Where
C – Consumer’s expenditure on durable and non durable goods.
I – Gross Domestic expenditure on fixed capital formation
G – General government’s expenditure on final consumption goods, like public and merit goods.
X – Exports.
M – Imports.
The aggregate demand curve:
