How can the Government increase aggregate demand

Aggregate demand is the sum of all the consumption, investment government spending and net exports within an economy (AD=C+I+G+(X-M)) An increase in this is seen as typically beneficial as for example an increase in consumption of goods leads to an increase in peoples well being. An increase in AD is symbolised by a rightward shift on the graph (illustrate on whiteboard)

The first method this is done by is  monetary policy. The lowering of interest rates lowers the cost of borrowing for invididuals and businesses alike. This will mean they are more likely to borrow and spend which will increase consumption and investment. In addition it disincentivises people saving money as less interest will be earned and thus consumption increases again. The other method is through fiscal policy where the government can either cut taxes or spend to increaes AD. Tax cuts mean that people have more money at the end of the month and are more likely to consume and government spending on infrastructure or subsidies directly increases the G componenent of AD.