If people expect higher income 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 income in the future, they are more likely to increase their current consumption (spending) as they can afford to do so with their expected higher income. This results in an increase in aggregate demand as there is an overall increase in demand for goods and services.

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