What effect would an increase in investment,combined with an increase in imports,have on aggregate demand (AD)?
A)AD would increase.
B)AD would stay the same.
C)AD could either increase or decrease, depending on which change was of a greater magnitude.
D)AD would decrease.

Question

Quizplus · Accepted Answer

The increase in investment would normally lead to an increase in AD, as it would increase spending in the economy. However, the increase in imports would lead to a decrease in AD, as it would mean that more money is being spent on goods and services produced in other countries rather than domestically. Therefore, whether AD increases or decreases would depend on which of these changes is of a greater magnitude.

What Effect Would an Increase in Investment,combined with an Increase