•Aggregate demand is the sum of four components: consumption, investment, … See more

The Keynesian perspective focuses on aggregate demand. The general idea being that firms produce output only if they expect it to sell.
Thus, whil… See more

Consumption expenditure is spending by households and individuals on durable goods, nondurable goods, and services. Durable goods are things that last and provide val… See more

Spending on new capital goods is called investment expenditure. Investment falls into four categories: producer’s durable equipment and software, new nonresidenti… See more

The third component of aggregate demand is spending by federal, state, and local governments. Although the United States is usually thought of as a market economy, governmen… See more

Exports are products produced domestically and sold abroad, and imports are products produced abroad but purchased domestically. Since aggregate demand is … See more