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AD = C + I + G + X - M — Economics Blog

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.

 

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