An increase in aggregate demand causes an increase in _______, which in turn induces an increase in _______.

Question

Quizplus · Accepted Answer

An increase in aggregate demand leads to an increase in income for individuals and businesses, which then leads to an increase in consumption as people have more to spend. Therefore, A is the best choice. B is not correct because an increase in investment may not necessarily lead to an increase in consumption. C is not correct because an increase in government spending may lead to an increase in net exports, but it is not a direct relationship. D is not correct because an increase in consumption does not always lead to an increase in price; it depends on the supply and demand for the goods being consumed.

An Increase in Aggregate Demand Causes an Increase in _______