Which components should be taken to show the aggregate demand?

A. Consumption

B. Savings

C. Deposits

D. Investment

E. Government expenditure

Choose the correct answer from the options given below"

A, D and E only

The correct answer is option (2) : A, D and E only

The reason for selecting components A, D and E to show aggregate demand is as follows :

1. Consumption (A): Consumption represents the total spending by households on goods and services. It is a significant component of aggregate demand because it reflects the demand for everyday items and services that people require.

2. Investment (D): Investment includes spending by businesses on capital goods like machinery, equipment, and structures. It also covers changes in inventories. Investment is a critical component of aggregate demand because it reflects business confidence and their willingness to expand and invest in productive capacity.

3. Government Expenditure (E): Government expenditure represents the spending by the government on various programs, services, and infrastructure. This component contributes to aggregate demand as it reflects government policies and initiatives to stimulate or support economic activity.

Components B (Savings) and C (Deposits) are not considered part of aggregate demand. Savings are related to individual and household behavior regarding income not spent, while deposits usually refer to funds placed in banks or financial institutions, which do not directly contribute to current spending and demand in the economy. Therefore, they are not part of the aggregate demand calculation.