You are viewing a free preview of this lesson.
Subscribe to unlock all 10 lessons in this course and every other course on LearningBro.
Government spending (G) and net trade (X − M) are the remaining components of aggregate demand. While consumption and investment are driven primarily by private sector decisions, government spending reflects political choices and policy priorities, and net trade depends on international competitiveness and global economic conditions. Together, these components complete the AD equation: AD = C + I + G + (X − M).
In macroeconomics, G refers to government expenditure on goods and services — the purchases that directly add to aggregate demand. This includes:
| Category | Examples |
|---|---|
| Current spending | NHS staff salaries, teachers' pay, military personnel costs, day-to-day running of public services |
| Capital spending | Building hospitals, schools, roads, railways — public sector gross fixed capital formation |
| Procurement | Government purchases from private firms — defence contracts, IT systems, consulting services |
Subscribe to continue reading
Get full access to this lesson and all 10 lessons in this course.