What is aggregate demand? What are its major components?
Aggregate demand is the total amount that all consumers, business firms, and government agencies spend on final goods and services. The major components are:
1 . Consumer expenditure is the total value of all consumer goods and services demanded.
2 . Investment spending is the amount that firms spend on factories, machinery, software, and the like, plus the amount that families spend on new houses.
3 . Government purchases of goods and services, includes items such as paper, computers, airplanes, ships, and labor bought by all levels of government.
4 . Net exports is defined as U.S. exports minus U.S. imports.
You might also like to view...
If the value of the marginal product of physical capital is $10 and the marginal product of physical capital is 5 units, the price of the finished good that the capital is used to produce is:
A) $1. B) $2. C) $5. D) $10.
Over twenty years ago the city of Washington D.C. was facing a budgetary shortfall. In a plan to increase tax revenue the mayor and city council agreed to raise the excise tax on gasoline
Typically for goods like gasoline which are price inelastic this should have led to an increase in tax revenue. However, just the opposite happened – tax revenue plummeted! What could explain this seemingly paradoxical result?