Page 44 - Macroeconomics. book docx_Neat

Only final goods and services are included in this approach to avoid double counting.

Intermediate goods are excluded because their value is already included in the value of

final goods.

For example, the value of raw materials used in production is not counted separately,

because it is already included in the price of the final product.

4.3 Aggregate (Total) Spending

Aggregate spending, also called total spending, represents the total demand in the
economy.

Aggregate Spending = C + I + G + (X − M)

Where:

C = Consumption spending

I = Investment spending

G = Government spending

X = Exports

M = Imports

Each component represents spending by a different sector of the economy.

44