In economics, aggregate demand is the total demand for goods and services in the economy during a specific time period. It is often called effective demand. Put another way, it is the demand for the gross domestic product of a country (the total new production sold through the market). This demand consists of four major parts, which can be stated either in either nominal or "real" terms:
- personal consumption expenditures (C) or "consumption," demand by households and unattached individuals; its determination is described by the consumption function.
- gross private domestic investment (I), demand by business firms and some individuals, for new factories, machinery, computer software, housing, other structures, and inventories.
- gross government investment and consumption expenditures (G).
- net exports (NX), i.e., net demand by the rest of the world for the country's output.