The demand for the economy's output:
A) is always equal to the supply, regardless of the interest rate.
B) may be computed provided that we know disposable income.
C) is equal to consumption, investment, and government purchases.
D) is determined by government purchases and taxes.

Question

Quizplus · Accepted Answer

The demand for the economy's output is equal to the sum of consumption, investment, and government purchases. This is known as the aggregate demand. Disposable income is one factor that can affect consumption, but it is not the only factor. Interest rates can also affect consumption and investment, but they do not directly determine the demand for the economy's output. Government purchases and taxes can also affect aggregate demand, but they are not the only components. Therefore, only answer choice C is correct.

The Demand for the Economy's Output