Income transfers become part of aggregate demand as soon as they occur.
Income transfers do not become part of aggregate demand until the transfer recipients decide to spend that income.

Question

Quizplus · Accepted Answer

Income transfers do not automatically become part of aggregate demand as soon as they occur because the recipients may choose to save the money or use it to pay off debt rather than spending it. Only when they spend the transferred income does it become part of aggregate demand.

Income Transfers Become Part of Aggregate Demand as Soon as They