What is the relationship between aggregate demand and GDP in an economy?

Aggregate demand refers to the total amount of goods and services that consumers, businesses, and the government are willing to buy at a given price level. It directly affects the level of economic activity, as measured by Gross Domestic Product (GDP). When aggregate demand increases, businesses produce more to meet the higher demand, leading to economic growth and an increase in GDP. Conversely, a decrease in aggregate demand can lead to a slowdown in economic activity and a decrease in GDP.