If people expect higher incomes in the future,then spending today ________ and aggregate demand ________.
A) increases; is unaffected
B) increases; increases
C) increases; decreases
D) decreases; decreases
E) is unaffected; is unaffected

Question

Quizplus · Accepted Answer

If people expect higher incomes in the future, they will be more willing to spend their money because they anticipate having more income in the future to cover their expenses. Therefore, spending today will increase. This increase in individual consumption will, in turn, increase the aggregate demand.

If People Expect Higher Incomes in the Future,then Spending Today