Aggregate Demand Calculator (C + I + G + NX)
Calculate aggregate demand by summing its four components: consumption, investment, government spending, and net exports.
Aggregate Demand
The AD Formula Aggregate Demand (AD) = C + I + G + (X - M)
- C = Consumer spending (typically 60-70% of GDP in developed economies)
- I = Business investment in capital goods and inventories
- G = Government purchases of goods and services (excludes transfer payments like welfare)
- X = Exports (spending by foreigners on domestic goods)
- M = Imports (domestic spending on foreign goods); NX = X - M
Why It Matters AD represents total planned expenditure in an economy at each price level. When AD rises (shifts right), output and employment tend to increase in the short run. When AD falls, recessions occur.
Fiscal Policy Governments can raise G or cut taxes (boosting C and I) to stimulate AD. The multiplier effect amplifies each dollar of new spending. Conversely, austerity reduces AD.
Components as Share of GDP In the US (approximate): C = 68%, I = 18%, G = 17%, NX = -3%. Most developed countries run a small trade deficit (negative NX).