What are the main sources of demand in a closed economy?

1. Consumption, government spending, and domestic investment
2. Consumption, net exports and government spending
3. Consumption, government spending, domestic investment and net exports
4. Government spending, net exports and domestic investment

Option 1 -> Includes C, G, and I which are the three components of aggregate demand in a closed economy.

Option 2 -> Incorrect because net exports cannot exist in a closed economy (no international trade).

Option 3 -> Incorrect because it includes net exports, which implies international trade that doesn't exist in a closed economy.

Option 4 -> Incorrect because it includes net exports and excludes consumption, which is a major demand component.

Hence, Option 1: Consumption, government spending, and domestic investment -> In a closed economy, there is no international trade, so net exports (NX) equal zero. The aggregate demand equation becomes Y = C + I + G, where consumption (C) represents household spending, investment (I) represents business capital expenditure and inventory changes, and government spending (G) represents public sector expenditure. These three components constitute all sources of demand when the economy doesn't engage in imports or exports. -> correct