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Aggregate Demand Componenets (Consumption (Durable goods (Fridges, cars,…
Aggregate Demand Componenets
Consumption
Durable goods
Fridges, cars
generally goods that lasts more than a year
Non durable goods
Rapidly consumed goods
Food
Basically: spending by consumers on durable and non-durable goods and services
Services
Legal services, insurance
Investment
Spending by firms and households
Firms: capital goods (eg machinery) to increase output
Households: housing
Government spending
spending on all government purchases
salaries for government workers
infrastructure
X - M (net exports)
Net exports count all exports as an in ow and thus an increase in GDP while subtracting imports as an out ow and a decrease in GDP.
Net exports = export revenues (X) – import payments (M)