Advertisements
Advertisements
Question
Statement 1: In a two sector economy, consumption expenditure and investment expenditure are the two components of Aggregate Demand.
Statement 2: Aggregate demand curve always start from point of origin with positive slope.
In the light of given statements, choose the correct alternative from the following:
Options
Statement 1 is true and Statement 2 is false.
Statement 1 is false and Statement 2 is true.
Both statements 1 and 2 are true.
Both statements 1 and 2 are false.
Advertisements
Solution
Statement 1 is true and Statement 2 is false.
Explanation:
- Only the household sector and the producer sector exist in a two-sector economy.
- Consumption expenditure, or spending on final products and services, is incurred by the household sector, whereas investment expenditure, or spending on fixed assets, is incurred by the producer sector.
- The Aggregate Demand (AD) curve begins on the Y-axis since there is always some degree of consumption and investment at zero income.
APPEARS IN
RELATED QUESTIONS
Gross investment =
What is the formula for aggregate demand (AD) in an open economy?
Which factor primarily drives consumption (C) expenditure by households?
Keynesian theory explains income and employment at which of the following levels?
Ex-ante (Desired Demand) refers to:
Ex-post demand is also known as:
Desired (ex-ante) demand and actual (ex-post) demand may differ due to:
A firm planned to sell its entire output during the year, but actual sales fell short of planned sales. The gap between the firm's desired demand and its actual (effective) demand arises from:
Which pairing correctly matches the demand concept with its area of use?
In the aggregate demand equation, the term C represents:
Household consumption expenditure (C) mainly depends on:
Planned investment expenditure (I) by firms mainly depends on:
Net exports \[(X - M)\] are influenced by:
Ex-ante and ex-post concepts apply to which macro variables, and for what purpose are they essential?
