Aggregate supply and demand in Mexico

Economic activity fluctuates from year to year. In most cases, the production of

goods and services increases. Due to the growth of the workforce, increases in

capital investment, and advances in technological knowledge, the economy may

produce more and more as time goes on. This growth should allow everyone to

enjoy a better standard of living. On average, in the last 25 years, the production of

the Mexican economy measured in terms of real GDP grew by around 2.5% each

year. In some years, however, the economy experiences contractions rather than

growth. Companies cannot sell all the goods and services they offer, so they

reduce production.

Aggregate demand (AD) refers to the total expenditure made by companies,

families and the government of a country during a given period, whether they are

nationals or foreigners within the country.

This concept therefore adds: the consumption of families or private consumption

(C), business investment (I), public spending (G) and the difference between

exports and imports (X - M).

DA = C + I + G + (X - M)

Household consumption (C) represents around two-thirds of GDP and about 50

percent of the country's aggregate demand, such a proportion makes us think

about how difficult it is for an economy to grow if consumption does not increase.

Investment (I) is undoubtedly the engine of an economy, because it is the point of

the formula in which jobs are generated, through which an economic spill is
generated that gives the population the capacity to demand and Therefore, the

stimulus for companies to expand their production capacity, from this it follows that

it is necessary for companies to be certain that their goods and services will be

absorbed by consumers, otherwise the virtuous circle between investment is cut,

employment and consumption.

Public spending, which for some allows the possibility of sustained economic

growth through its influence on the increase in productivity of companies and on

the well-being of individuals, is used as an effective economic policy tool to

mitigate fluctuations in income. economic activity, although there is also another

aspect that views public spending as a displacement factor for private activity.

In the last section of the equation, exports minus imports (X-M) refers to the fact

that only what is left in the domestic economy is taken into account, that is, when

there is more that was imported than what was exported and vice versa.
Fuente: https://www.eleconomista.com.mx/economia/oferta-y-demanda-agregada-

en-Mexico-20200222-0007.html