Which component of aggregate demand does the chapter describe as the m…

Question

Which component of aggregate demand does the chapter describe as the most volatile and a prime cause of business cycles?

Accepted Answer

A. Investment spending

1. Some economists hold that fluctuations in investment are the prime cause of cycles.
2. The chapter states investment spending is the most volatile component of aggregate demand.
3. So the correct choice is investment spending.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.7_

Answer

Household consumption

Answer

Government transfer payments

Answer

Import expenditure

Which component of aggregate demand does the chapter describe as the most volatile and a prime cause of business cycles?

Keep practising Unit 1A: Scarcity, Choice and Opportunity Cost