Every time an individual buys groceries, pays rent, dines at a restaurant, or books a vacation, they contribute to aggregate demand (AD)—the total spending on goods and services within an economy. Aggregate demand is a key economic indicator, representing the combined consumption, investment, government spending, and net exports of a country. It helps determine economic growth, employment levels, and inflation rates. This project challenges students to analyze how their own consumer spending patterns contribute to aggregate demand and how changes in spending behavior can impact broader economic conditions.

Students will begin by researching the four components of aggregate demand—consumer spending (C), investment spending (I), government spending (G), and net exports (X - M)—and how they drive overall economic activity. They should examine how income levels, interest rates, inflation, and consumer confidence affect personal spending decisions, influencing AD in both the short and long run. For example, during economic uncertainty, consumers tend to reduce discretionary spending, which can lead to lower aggregate demand, slower economic growth, and increased unemployment. Conversely, when consumer confidence is high, people are more likely to spend, boosting AD and stimulating business investment.

A key part of this project involves analyzing personal or national consumer spending habits to identify trends in aggregate demand fluctuations. Students should investigate how their own spending choices—such as cutting back on luxury purchases during inflationary periods or taking advantage of discounts during economic downturns—reflect broader economic shifts. Additionally, they should explore how government policies, such as tax cuts, stimulus checks, or interest rate adjustments, influence consumer spending and affect AD.

Students should also consider real-world case studies of how consumer spending has affected economies in the past. For instance, in times of recession, lower consumer spending has led to job losses and reduced production, while in periods of strong economic growth, higher demand has fueled business expansion and wage increases. Examining these trends can help students understand why governments monitor and manage aggregate demand through fiscal and monetary policies to ensure economic stability.

The final short report will summarize how individual consumer spending contributes to aggregate demand, discussing personal, national, and global factors influencing spending patterns. The goal of this project is for students to connect their everyday financial decisions to macroeconomic trends, demonstrating that personal consumption habits play a crucial role in shaping economic conditions.