Which components are included in aggregate demand?

The correct answer identifies the four primary components that make up aggregate demand in an economy: consumption, investment, government expenditure, and net exports.

Consumption refers to the total spending by households on goods and services. It generally accounts for the largest portion of aggregate demand. Investment encompasses spending by businesses on capital goods (like machinery and buildings) and residential investments. Government expenditure includes all government consumption and investment, reflecting the fiscal policies of the government. Lastly, net exports account for the difference between a country’s exports and imports, representing the trade balance and its impact on domestic demand.

Understanding these components is essential as they illustrate how demand within an economy is driven by various sectors and influences economic growth, employment, and inflation. The other options present terms that do not directly reflect the major components of aggregate demand; therefore, they do not accurately capture the sum of demand within an economy.