Question

In a two-sector model, the two sources of final demand are:

Options

• Consumption and Investment

• Savings and Consumption

• Consumption and Government spending

• Investment and Net exports

Answer 1

A two-sector model has exactly two sources of final demand: Consumption and Investment. The consumption component is captured by the consumption function \[C=\bar{C}+cY\] and the investment component by the investment function \[I = \overline{I}\].