How is aggregate demand expressed in formulaic terms?

The expression of aggregate demand in formulaic terms is represented as AD = C + I + G + (X - M). This formula encapsulates the total demand for all final goods and services in an economy at a given overall price level and in a given period.

In this formula:

• C stands for consumption, which is the total spending by households on goods and services.

• I represents investment, indicating spending on capital goods that will be used for future production.

• G refers to government spending on goods and services.

• (X - M) represents net exports, where X is the value of exports and M is the value of imports. This component measures the difference between what a country sells to the outside world and what it buys from it.

By combining these components, the formula highlights the overall economic activity and the factors that contribute to total demand within an economy. This understanding is crucial because aggregate demand directly influences inflation, employment, and overall economic growth, making it a central concept in macroeconomic analysis.

The other options refer to different economic concepts. For example, consumption plus savings plus taxes does not represent an overall measure of demand, while the marginal propensity to consume (MPC) and the average propensity to save (APS) relate