Financial Terminology Series -3

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TERM OF THE DAY

Aggregate Demand



The sum of all final goods and services produced in an economy expressed as the total amount of money exchanged for those goods and services, used as an economic measurement, is known as Aggregate Demand.

As it only represents total output at a given price level and does not necessarily represent quality or standard of living because it is measured through market value.


The Keynesian equation for aggregate demand is: 

                                                          AD = C+I+G+(Nx)

Here :

C mean           =   Consumer spending on goods and services

I   mean          =   Private investment and corporate spending for non-final capital  
                            goods (factories, equipment, etc.)
         
G mean         =    Government spending for public goods and social services 
                            (infrastructure, Medicare, etc.)

Nx                 =     Net exports (exports minus imports)


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