Aggregate Demand:

In macroeconomics we use the  term aggregate demand (AD)  to include the  total demand for goods and services produced in  the economy. Aggregate demand is an inverse function  in prices depicted by a downward sloping curve. Thus, as prices increase, aggregate demand decreases.

Aggregate  demand  is  viewed  in  terms  of  expenditure  or spending  on  goods  and services. There are  four major components  of aggregate deniand: 

i)  consumption expenditure, 

ii) investment,

iii)  goverment  expenditure,  and 

iv) net exports. Thus  

where Q^D is aggregate demand, C is  consumption expenditure,  I  is  investment, G  is government  expenditure,  X is  exports  and M is  imports. Thus  (X-M)  indicate  net exports. In a closed economy, where there  is no  foreign trade, X and M are equal to zero.