Question

What are the components of aggregate supply?

Answer 1

Aggregate supply has the following four components:

1. Aggregate (desired) consumption expenditure (C).
2. Aggregate (desired) private savings (S).
3. Net tax payments (T) (Total tax payment to be received by the government minus transfer payments, subsidy, and interest payments to be incurred by the government).
4. Personal (desired) transfer payments to foreigners (Rf) (e.g. Donations to international relief efforts).