Aggregate demand refers to the whole quantity of demand for all completed goods and services produced in an exceedingly certain economy, it’s the whole amount of cash exchanged for those products and services at a specific price index and point in time. Hence, it’s the demand for finished products and services in an economy. Finished goods and services are entirely manufactured, excluding intermediate commodities that are utilised as inputs within the manufacturing process.
General Components of aggregate demand are as follows:
- Consumer spending on goods and services
- Corporate spending on non- final capital goods
- Private investment
- Government expenditure
- Net exports= exports-imports
When a country’s currency depreciates in value versus other currencies, domestic commodities become more cost-effective to foreigners while imports become dearer. As a result, at cheaper price levels, when domestic items are more cost-effective than imported commodities, demand for exports rises, leading to a rise in aggregate demand.