When at a particular price level, aggregate demand for final goods equal aggregate supply of final goods, the final goods or product in market reaches it equilibrium. Aggregate demand for final goods consist of ex-ante consumption, ex-ante investment, government spending etc. The rate of increase in ex-ante consumption due to a unit increase in income is called marginal propensity to consume.

Aggregate demand for final goods doesn't include___________

Saving

The correct answer is option (2) : Saving

Aggregate demand (AD) refers to the total demand for final goods and services produced in an economy at a given time. Aggregate demand for final goods typically includes consumption, investment, government spending, and net exports.

1. Consumption (C) : Consumption refers to the total spending by households on goods and services. It includes purchases of items like food, clothing, electronics, and services. Consumption is a crucial component of aggregate demand as it represents the demand generated by individuals for their personal satisfaction and well-being.

2. Saving (S) :- Saving, on the other hand, is not a direct component of aggregate demand. Saving represents the portion of income that households do not spend on consumption. While saving is a  financial activity, it is not included in aggregate demand calculations because it is money not spend on immediate goods and services.

3. Investment (I) :- It is a key component of aggregate demand and includes spending on capital goods such as machinery, equipment, and structures. It represents the expenditures made by businesses and individuals to enhance future production capacity. Investment contributes to economic growth and is a crucial factor in the determination of aggregate demand.

4. Government Spending (G) :- Government spending is another important component of aggregate demand. It includes all expenditures made by the government on goods, services, infrastructure, and public programs. Government spending influences the overall demand in the economy and can be used as a tool for fiscal policy to manage economic conditions.

In summary, while consumption, investment, and government spending are components of aggregate demand, saving is not directly included. Aggregate demand is the total demand for goods and services in an economy, encompassing the expenditures made by households, businesses, and the government. Saving represents a withdrawal from current spending ans is not considered as part of immediate demand.