AD = C + I + G + X – M

Readers Question: what does AD stand for in economic terms??

AD = Aggregate Demand.

Aggregate Demand is composed of various factors C, I, G, X – M

C= Consumer spending

I = Investment (Gross fixed Capital Formation)

G= Government Spending

X= Exports

M= Imports

AD places a crucial role in determining the level of national output in an economy. Although Monetarists will argue it is AS which will determine the long run trend rate of growth.