Which formula is used for the calculation of Ex Ante Aggregate Demand?

Question

Question

This question was previously asked in

RRB Group D 1 Sept 2022 Shift 1 Official Paper

Answer 1

The correct answer is '\(\bf \bar{C}+\bar{I}+c Y \: \:\)'.

Key Points

In an economy without a government, the ex-ante aggregate demand for final goods is the sum total of the ex-ante consumption expenditure and ex-ante investment expenditure on such goods, viz. AD = C + I.
Aggregate demand for final goods can be written as

AD = \(\bar{C}+\bar{I}+c Y\)

Y = \(\bar{C}+\bar{I}+c Y\)

where Y is the ex-ante, or planned, output of final goods.
This equation can be further simplified by adding up the two autonomous terms, C and I, making it

Y = A + c.Y

Where A = C + I is the total autonomous expenditure in the economy.
In reality, these two components of autonomous expenditure behave in different ways.
C, representing the subsistence consumption level of an economy, remains more or less stable over time.
However, I have been observed to undergo periodic fluctuations.