ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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C
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G
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I
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None of the above
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Detailed explanation-1: -Consumption spending (C) is the largest component of an economy’s aggregate demand, and it refers to the total spending of individuals and households on goods and services in the economy.
Detailed explanation-2: -Aggregate Demand = C + I + G + Nx where: C = Consumer spending on goods and services I = Private investment and corporate spending on non-final capital goods (factories, equipment, etc.)
Detailed explanation-3: -Statistics show that consumption, i.e. purchases of households, is the most stable component of aggregate expenditure.
Detailed explanation-4: -Investment, second of the four components of aggregate demand, is spending by firms on capital, not households. However, investment is also the most volatile component of AD.
Detailed explanation-5: -Aggregate demand is the sum of four components: consumption, investment, government spending, and net exports.