Question

Write two components of aggregate demand.

Hint:

Aggregate demand plays a crucial role in determining the overall economic activity and price levels in an economy.

Answer 1

Step 1: Understanding Aggregate Demand.
Aggregate demand (AD) is the total quantity of goods and services demanded in the economy at different price levels. It is the sum of consumption expenditure, investment expenditure, government spending, and net exports. Two important components of aggregate demand are: 

1. Consumption (C): This is the total expenditure on goods and services by households. 

2. Investment (I): This includes expenditure on capital goods by businesses, such as machinery, buildings, and inventories.

Step 2: Conclusion.
Thus, consumption and investment are two key components of aggregate demand.