ECONOMICS (CBSE/UGC NET)

ECONOMICS

AGGREGATE DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
which of the following is not true about AD in a two-sector economy?
A
AD= consumption + saving
B
AD curve starts from some point above the origin
C
AD=consumption + investment
D
AD curve has a positive slope
Explanation: 

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.

There is 1 question to complete.