Aggregate Demand Components in a Closed Economy Steps:

• Recall that aggregate demand (AD) measures total spending on goods and services.
• In a closed economy, there is no international trade, so exports (X) and imports (M) are zero.
• The standard AD formula excludes trade terms: AD = C (consumption) + I (investment) + G (government spending).
• Evaluate choices to find the one that aligns with this when trade is absent.

Why A is correct:

• In a closed economy, X = 0, so C + I + G + X simplifies exactly to C + I + G, the defining formula for total AD.

Why the others are wrong:

• B includes net exports (X - M) subtraction, irrelevant and incorrect for no-trade closed economy.
• C subtracts imports (M), but M = 0 and the term shouldn't appear in the closed-economy formula.
• D involves taxes (T) and subtracts net government spending, which misrepresents AD components.

Final answer: A