Aggregate demand, also total spending, is the total amount of goods and services demanded in the economy during a specific time period, usually a year, at a given overall price level. It’s simply the sum of all individual demands.
The aggregate demand is the demand for the GDP of an economy, therefore the AD function is notated as AD, or Yd = C + I + G + NX. This function shows that the aggregate demand equals to the sum of consumption(C), investment(I), government spending(G) and the net export(NX = X – M). So in essence, it is the same with that of GDP.
AD increases when buyers possess more money or the overall price level declines.
In conjunction with aggregate supply, aggregate demand largely determines how an economy works, at its full strength or slackly untamed with complaining people everywhere.