Give reasons or explain.
1) Investment demand is not the sole determinant of aggregate demand.
Answer: Investment demand is not the sole determinant of aggregate demand. Apart from investment demand, consumption demand, government demand, exports and imports are also the components of aggregate demand.
AD = C + I + G + (X – M)
Where,
Demand by households - Private consumption expenditure (C)
Demand by firms - Private investment expenditure (I)
Demand by government - Government expenditure (G)
Demand by foreign sector- Net exports (X – M)
Where, X is exports and M is imports.
