Question

In the aggregate demand equation, the term C represents:

Options

• Desired investment expenditure by firms

• Desired consumption expenditure by households

• Desired expenditure on imported goods

• Desired government expenditure on goods and services

Answer 1

In \[AD = C + I + G + (X - M)\], C denotes desired consumption expenditure by households, i.e., household expenditure on goods and services. It mainly depends on disposable income.