In the previous section, we saw the formula for aggregate demand (AD) is:
$$ \text{AD} = C + I + G + (X - M) $$
This section will break down each component.
Consumption (C) represents all spending made by households on final goods and services during a particular time period.
Remember, consumption is driven by disposable income: the money households have available to spend (after paying taxes, outside saving accounts...).
The investment (I) component of AD is composed of investments:
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