Which components make up aggregate demand?

Aggregate demand represents the total quantity of goods and services demanded across all levels of an economy at a given overall price level and in a given time period. The components that make up aggregate demand are essential to understanding how different sectors contribute to overall economic activity.

The correct components of aggregate demand are consumption, investment, government spending, and net exports. Consumption refers to the total spending by households on goods and services. Investment includes business expenditures on capital goods that facilitate future production. Government spending encompasses all government consumption and investment, which directly affects aggregate demand. Finally, net exports measure the value of a country's exports minus its imports, indicating the contribution of international trade to domestic economic demand.

Understanding these components is crucial because they illustrate how various sectors interact and influence the economy's overall demand. For example, when consumer confidence rises, consumption tends to increase, which can bolster economic growth. Similarly, increased government spending can stimulate demand during economic downturns.

The other options do not accurately reflect the components of aggregate demand. They either focus on factors that do not measure total demand or involve concepts like taxation and employment that are more accurately linked to policy and labor market conditions instead of direct demand components.