Multiple Choice Questions on Aggregate Demand in an economy usually increases with an increase in National Income Investment Gove........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

Aggregate Demand in an economy usually increases with an increase in National Income Investment Gove...........

Economic Affairs Others
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    Aggregate Demand in an economy usually increases with an increase in

    1. National Income
    2. Investment
    3. Government spending

    Select the correct answer using the codes below.

    1 and 2 only

    Incorrect Answer

    2 and 3 only

    Incorrect Answer

    1 and 3 only

    Incorrect Answer

    1, 2 and 3

    Correct Answer
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    Explanation:

    Under the effective demand principle, the equilibrium output of the final goods is equal to ex ante aggregate demand.

    Thus, a basic equation used for determining aggregate demand is

    AD = Y = C I G, where C is usually an increasing function of national income. Y is total output. Based on the above, if any of the factors are increased, it increases the AD.

    By: Pradeep Kumar
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