Aggregate Demand (AD)
Plain definition
Aggregate demand is the total demand for all final goods and services in an economy at a given overall price level and time period. It is the sum of consumption (C), investment (I), government spending (G), and net exports (NX): AD = C + I + G + NX.
In economics
Aggregate demand is the centerpiece of Keynesian macroeconomics: short-run output and employment are driven by spending, so recessions are treated as shortfalls of AD that fiscal and monetary stimulus can fill. The AD curve slopes downward — lower price levels boost real wealth, interest-rate, and trade effects — and shifts from policy, confidence, or foreign demand move the whole economy along the short-run aggregate supply curve.
Example
During the 2008 crisis, collapsing consumption and investment shifted U.S. aggregate demand sharply left — output fell and unemployment soared. The government's stimulus (higher G) and the Fed's rate cuts were textbook attempts to shift AD back right and close the output gap.
Aggregate demand is often confused with market demand for a single product. Market demand slopes down because of substitution between goods; aggregate demand slopes down for economy-wide reasons (wealth, interest-rate, and international price effects) — there is no 'substitute economy.' It is also a flow of spending per period, not a stock of wealth.