Which one of the following statements is the most accurate?
A) A rise in domestic real income raises aggregate demand for home output.
B) A rise in domestic real income decreases aggregate demand for home output because of the increase demand for import.
C) A rise in domestic real income keeps aggregate demand for home output at the same level.
D) It is difficult to tell whether a rise in domestic real income affects positively or negatively aggregate demand for home output.
E) A rise in domestic real income decreases aggregate demand for home output because the CA is raised.

Question

Quizplus · Accepted Answer

When domestic real income rises, consumers have more disposable income and are therefore able to purchase more goods, including domestic output. This leads to an increase in aggregate demand for home output.

Which One of the Following Statements Is the Most Accurate