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Question : 3
Total: 49
Read the following statements carefully:
Statement 1: In a two sector economy, consumption expenditure and investment expenditure are the two components of Aggregate Demand.
Statement 2: Aggregate demand curve always start from point of origin with positive slope.
In the light of given statements, choose the correct alternative from the following:
Statement 1: In a two sector economy, consumption expenditure and investment expenditure are the two components of Aggregate Demand.
Statement 2: Aggregate demand curve always start from point of origin with positive slope.
In the light of given statements, choose the correct alternative from the following:
Solution:
(a) Statement 1 is true and Statement 2 is false.
Explanation:
(i) In a two-sector economy, there are only Household sector and Producer sector.
(ii) Household sector incurs consumption expenditure i.e., expenditure on purchase of final goods and services and producer sector incurs investment expenditure i.e., expenditure on purchase of fixed assets.
(iii) Aggregate Demand (AD) curve starts fromY
Explanation:
(i) In a two-sector economy, there are only Household sector and Producer sector.
(ii) Household sector incurs consumption expenditure i.e., expenditure on purchase of final goods and services and producer sector incurs investment expenditure i.e., expenditure on purchase of fixed assets.
(iii) Aggregate Demand (AD) curve starts from
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