Which of the following is NOT a component of aggregate demand?

• A. Consumption
• B. Investment
• C. Trade surplus
• D. Government spending

Answer: (C)

The correct answer is trade surplus, which is not considered a direct component of aggregate demand. Aggregate demand is comprised of four primary components: consumption, investment, government spending, and net exports. Net exports are calculated as total exports minus total imports. A trade surplus, which occurs when exports exceed imports, contributes to net exports but is not itself a separate component within the aggregate demand formula.

In the context of the aggregate demand equation (AD = C + I + G + (X - M), where X represents exports and M represents imports), the trade surplus affects the net export part of aggregate demand but does not stand alone as a separate category. Therefore, while it plays a role in the overall demand through net exports, it does not function individually as a component of aggregate demand.