Which factors determine aggregate demand?

Aggregate demand represents the total quantity of goods and services demanded across all levels of the economy at a given price level and in a given time period. The correct answer encompasses the four major components that directly influence aggregate demand: consumer spending, investment spending, government spending, and net exports.

Consumer spending refers to the total expenditure by households on goods and services, which is a significant driver of economic activity. Investment spending includes business expenditures on capital goods that will be used to produce further goods and services in the future, contributing to economic growth. Government spending involves public sector spending on goods and services, which can stimulate or cool down the economy depending on the fiscal policies in place. Net exports reflect the balance between exports and imports; when a country exports more than it imports, it adds to aggregate demand, and vice versa.

The other choices focus on narrower aspects or exclude key components that fundamentally shape the aggregate demand. For example, while interest rates and inflation can influence aggregate demand by affecting how much consumers and businesses wish to spend, they are not direct components of aggregate demand itself. Additionally, focusing solely on consumer and investment spending misses the critical roles that government and net exports play in the overall economic framework. Thus, the comprehensive view provided in the correct choice reflects