ECONOMICS
AGGREGATE DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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AD= consumption + saving
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AD curve starts from some point above the origin
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AD=consumption + investment
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AD curve has a positive slope
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Detailed explanation-1: -The expenditure by the government sector and net exports are not included in the two sector economy.
Detailed explanation-2: -In a 2 sector economy aggregate demand equals, Consumption + Private consumption expenditure.
Detailed explanation-3: -The correct answer is A) Sales tax receipts. In the above-given statement, sales tax receipts are not included in the aggregate demand components.
Detailed explanation-4: -In the basic two-sector circular flow of income model, the economy consists of two sectors: (1) households and (2) firms.
Detailed explanation-5: -The most important component of AD is consumer spending. This makes up around 60% of the AD figure. Therefore, factors effecting consumption such as interest rate changes can have a big impact on the overall AD value and therefore economic growth.