<Li> X (\ displaystyle X) is total exports, and </Li> <Li> M (\ displaystyle M) total imports, given by a m + b m (Y − T) (\ displaystyle a_ (m) + b_ (m) (Y-T)). </Li> <P> These four major parts, which can be stated in either' nominal' or' real' terms, are: </P> <Ul> <Li> personal consumption expenditures (C (\ displaystyle C)) or "consumption," demand by households and unattached individuals; its determination is described by the consumption function . A basic conception is that it is the total consumption expenditures of the domestic economy . The consumption function is C = a + M P C × (Y − T) (\ displaystyle C = a + MPC \ times (Y-T)), where <Ul> <Li> a (\ displaystyle a) is autonomous consumption, M P C (\ displaystyle MPC) the marginal propensity to consume, and (Y − T) (\ displaystyle (Y-T)) the disposable income . </Li> </Ul> </Li> <Li> gross private domestic investment (I (\ displaystyle I)), such as spending by business firms on factory construction . This is conceived as all private sector spending aimed at the production of some future consumable . <Ul> <Li> In Keynesian economics, not all of gross private domestic investment counts as part of aggregate demand . Much or most of the investment in inventories can be due to a short - fall in demand (unplanned inventory accumulation or "general over-production"). The Keynesian model forecasts a decrease in national output and income when there is unplanned investment . (Inventory accumulation would correspond to an excess supply of products; in the National Income and Product Accounts, it is treated as a purchase by its producer .) Thus, only the planned or intended or desired part of investment (I p (\ displaystyle I_ (p))) is counted as part of aggregate demand . (So, I (\ displaystyle I) does not include the' investment' in running up or depleting inventory levels .) </Li> <Li> Investment is affected by the output and the interest rate (i (\ displaystyle i)). Consequently, we can write it as, I (Y, i) (\ displaystyle I (Y, i)), a function I which takes total income and interest rate as parameters . Investment has positive relationship with the output and negative relationship with the interest rate . Thus, an increase in the interest rate will cause aggregate demand to decline . Interest costs are part of the cost of borrowing and as they rise, both firms and households will cut back on spending . This shifts the aggregate demand curve to the left . This lowers equilibrium GDP below potential GDP . </Li> </Ul> </Li> <Li> gross government investment and consumption expenditures (G (\ displaystyle G)), also determined as G − T (\ displaystyle G-T), the difference of government expenditures and taxes . An increase in government expenditures or decrease in taxes, therefore leads to an increase in GDP as government expenditures are a component of aggregate demand . </Li> <Li> net exports (N X (\ displaystyle NX) and sometimes (X − M (\ displaystyle X-M))), net demand by the rest of the world for the country's output . This contributes to the current account . </Li> </Ul>

If there is a excess demand for product x