Question

Which combination of factors would most likely increase aggregate demand? A. An increase in household indebtedness...

Which combination of factors would most likely increase aggregate demand?
A.

An increase in household indebtedness and a decrease in net exports.
B.

An increase in net exports and a decrease in government spending.
C.

An increase in consumer wealth and a decrease in interest rates.
D.

An increase in business taxes and a decrease in profit expectations.
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Homework Answers

Answer #1

As we know that, demand is a desire backed by willingness to pay and ability to pay. A mere desire or mere willingness doen not mean demand in economics. It needs both things willingness to pay and ability to pay.

Aggregate demand is the total demand for goods and services in the econnomy. The aggregate demand represents the total quantity of all goods (and services) demanded by the economy at different price levels.

The correct option is (c).

An increase in Consumer wealth and a decrease in interest rate.

The aggregate demand increase when the wealth of Consumer increases and when rate of interest falls.

Hope you got the answer.

Kindly comment for further explanation.

Thanks ?

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