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The determinants of the components of aggregate demand.
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| Submitted: Fri Oct 10 2003
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The Determinants of the Components of Aggregate Demand Aggregate Demand is the total of all demands or expenditures in the economy at any given price. It is made up of four components, which are Consumption (C), Investment (I), Government Spending (G) and Net Exports (NX). Out of these, I will be discussing the determinants of Consumption, Investment and Net Exports. Consumption or consumers' expenditure is the most important component of aggregate demand. It accounts for about 67% of UKs aggregate demand. It is the amount of money spent by individuals on durable goods such as PCs and cars, non-durable goods such as hair gel, food and drinks, and services such as the Internet and insurance. A key determinant of consumer spending is the level of disposable income, which is income after the payment of compulsory direct taxes and social security contributions. As one's income increases, so too does spending on the above...
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