What are the main sources of demand in a closed economy?

The correct answer is Option (1) → Consumption, government spending, and domestic investment

• A closed economy is one that does not engage in foreign trade — meaning no exports or imports.

• Therefore, net exports = 0.

In such an economy, total demand (Aggregate Demand) comes only from domestic sources, which are:

Aggregate Demand (AD)=C+I+G where:

• C = Consumption expenditure by households

• I = Investment expenditure by firms

• G = Government expenditure