ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate demand in two sector economy only includes the expenditure made by the consumer sector and the producer sector. The expenditure by the government sector and net exports are not included in the two sector economy.

Detailed explanation-2: -Aggregate demand is the sum of four components: consumption, investment, government spending, and net exports. Consumption will change for a number of reasons, including movements in income, taxes, expectations about future income, and changes in wealth levels.

Detailed explanation-3: -The model described above is the two-sector model, which is the most basic model containing only two sectors: individuals or households and businesses. In the two-sector model, it is assumed that households spend all their incomes as consumer expenditures and purchase the goods and services produced by businesses.

Detailed explanation-4: -As aggregate demand refers to the total demand for the goods and services produced in the economy, it does not include imports.

Detailed explanation-5: -Question 59 Answer : taxes Correct answer is option A) taxes Taxes are not the part of aggregate expenditure. Aggregate demand is calculated by adding Consumption, investment, government spending and net exports ( exports-imports ) Option B)