What is aggregate demand defined as?

Aggregate demand is defined as the total demand for goods and services in an economy at a given price level. This concept encompasses the overall spending on the nation's goods and services, including consumption by households, investment by businesses, government spending, and net exports (exports minus imports).

Understanding aggregate demand is crucial because it reflects the overall level of economic activity at various price levels, and shifts in aggregate demand can have significant implications for employment, output, and inflation within the economy. For example, an increase in aggregate demand typically leads to higher output and employment, but it can also contribute to inflation if the economy is already operating near full capacity.

The other options do not accurately capture the definition of aggregate demand. The total supply of goods and services refers to aggregate supply, which is a different concept. The overall income generated by all sectors of the economy relates to the concept of national income or gross domestic product, while the combined value of all goods produced in a year reflects gross output or GDP, which, although related, does not specify demand. Thus, option A is the most accurate representation of aggregate demand.