Define aggregate demand.

Aggregate demand is defined as the total demand for all goods and services in an economy at a given price level. This includes the sum of consumption expenditure by households, investment expenditure by businesses, government spending, and net exports (which are exports minus imports). The concept captures the overall spending in the economy and reflects how much goods and services consumers, businesses, and the government are willing to purchase at various price levels.

Understanding aggregate demand is crucial, as it plays a significant role in determining economic output and influencing business cycles. When aggregate demand increases, it can lead to higher levels of production, job creation, and economic growth. Conversely, a decrease in aggregate demand can lead to economic downturns and reduced levels of employment.

The other options do not accurately capture the essence of aggregate demand. One suggests the total supply of goods and services, which pertains to aggregate supply, not demand. Another option refers to the demand for labor, which is more closely related to labor markets and employment conditions. Finally, the total of consumer savings and investments does not reflect the demand side of the economy but rather focuses on financial behaviors and capital accumulation, which are separate from the concept of aggregate demand.