Aggregate Demand
Aggregate demand (AD) is the total spending on goods and services produced within an economy at different overall price levels. It comprises consumption (C), investment (I), government spending (G), and net exports (X-M). The AD curve slopes downward showing inverse price-quantity relationship.
Real World
During COVID-19 lockdowns in 2020, UK aggregate demand collapsed as consumption, investment, and exports all fell simultaneously, causing GDP to shrink by 9.7% — the largest annual decline in over 300 years.
Exam Focus
Always distinguish between movements along AD (price level changes) and shifts of AD (changes in C, I, G, or X-M components).
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