Question

Aggregate demand depends on the ____________ in the economy.

• A. level of inflation
• B. level of income
• C. level of output
• D. both A & C

Answer 1

The correct option is B level of income

Aggregate demand refers to the total expenditure on the purchase of all goods and services in the economy during an accounting period. It depends on the level of income of the economy. Higher level of income of the economy will lead to higher aggregate demand. Thus, level of income and aggregate demand is directly proportional.