ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -In other words, there is more desired investment at each level of income. As a result equilibrium income rises from Y0 to Y1. Thus while a rise in planned investment expenditure raises equilibrium national income, a fall in planned investment expenditure lowers it.
Detailed explanation-2: -Output is at its equilibrium when quantity of output produced (AS) is equal to quantity demanded (AD). The economy is in equilibrium when aggregate demand represented by C + I is equal to total output.
Detailed explanation-3: -The equilibrium level of income refers to when an economy or business has an equal amount of production and market demand.
Detailed explanation-4: -The reason for higher increase in equilibrium output than increase in investment is multiplier effect because change in investment (DI) causes multiple change in income (DY).