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Question
Give reason or explain.
Investment demand is not the sole determinant of aggregate demand.
Solution
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.
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