Aggregate demand (AD) refers to the total level of demand for goods and services in an economy at a given price level over a specific period. It reflects the overall spending by all sectors of the economy and is a key concept in macroeconomics for understanding economic fluctuations.

Aggregate demand is calculated using the formula: AD = C + I + G + (X – M), where:

• C represents household consumption spending on goods and services;
• I denotes business investment in capital goods;
• G indicates government expenditure on goods and services;
• X – M signifies net exports, calculated as the value of exports (X) minus imports (M).