ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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consumption expenditure, which increases current aggregate demand
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investment, which increases current aggregate supply
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the demand for money, which decreases current aggregate demand
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future consumption expenditure and has no effect on current aggregate demand
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Detailed explanation-1: -Income and Wealth As household wealth increases, aggregate demand typically increases. Conversely, a decline in wealth usually leads to lower aggregate demand. When consumers are feeling good about the economy, they tend to spend more and save less.
Detailed explanation-2: -Aggregate demand increases when the components of aggregate demand–including consumption spending, investment spending, government spending, and spending on exports minus imports–rise.
Detailed explanation-3: -An increase in any of the components of aggregate demand – consumption spending, investment spending, government spending, and net exports (X-M) – shifts the aggregate demand curve to the right, and a fall in any of these components shifts it to the left.
Detailed explanation-4: -A rise in expenditure by either Consumption, Investment or the Government or an increase in exports or a decrease in imports leads to a rise in the aggregate expenditure and thus pushes the economy towards a higher equilibrium and thus reaching a higher level towards the potential GDP.