Aggregate Demand Componenets
Consumption
Investment
Government spending
X - M (net exports)
Durable goods
Non durable goods
Basically: spending by consumers on durable and non-durable goods and services
Fridges, cars
Rapidly consumed goods
generally goods that lasts more than a year
Food
Services
Legal services, insurance
Spending by firms and households
Firms: capital goods (eg machinery) to increase output
Households: housing
spending on all government purchases
salaries for government workers
infrastructure
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)