Question

Changes in aggregate demand

A. are primarily based on changes in​ firms' abilities to produce products.
B. could be caused by changes in the spending decisions of the​ households, businesses, the​ government, and foreigners.
C. are unlikely to change quickly in response to economic events.
D. are not affected by changes in government policies.

Answer 1

The correct answer is option B.

Step-by-step explanation:

The aggregate demand comprises of consumption spending, investment expenditure, government purchases, and net exports. It is a downward-sloping curve which is inversely related to the price level.

Changes in aggregate demand are caused when there is a change in consumer spending, investment expenditure, government purchases or net exports, or all of them.

This basically means that aggregate demand is affected by the spending decisions of the​ households, businesses, the​ government, and foreign consumers.