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Expenditure Method

Consumption i...

Question

Consumption is one of the determinants of aggregate supply.

A

True

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B

False

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Solution

The correct option is B False
False. Consumption expenditure is not a determinant of aggregate supply. It is a determinant of aggregate demand. Aggregate demand = consumption + investment + government expenditure and consumption + net exports.

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What is Aggregate Supply? Explain the determinants of Aggregate Supply.

Q. Write explanatory answer:
What is aggregate supply? Explain the determinants of aggregate supply.

Q. State whether the following statements are true or false.
1. Consumption expenditure is the only component of aggregate demand.
2. The difference between a country's exports and imports is termed as net earnings from foreign transactions.
3. Autonomous consumption is income elastic.
4. The equality between aggregate demand and aggregate supply determines the equilibrium level of employment.
5. At breakeven point Consumption (C) is equal to income (Y).

Q. State with reasons whether you agree or disagree with the following statements.
1) Aggregate demand depends only on the consumption expenditure.
2) Aggregate supply is influenced by the state of technology only.
3) Positive net earnings from foreign transactions add to aggregate demand.
4) At break-even point, consumption (C) is equal to income (Y).
5) Savings are negative before break-even point.

Q. Answer the following questions:

What are the determinants of Aggregate Supply (AS)?

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