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| Topic: |
Business
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| Number of pages / Number of words: |
3 / 635 |
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According to Keynes’ theory, the level of aggregate demand is the most important factor influencing economic growth (Dixon & O’Mahony, 2004, pg.128). And the components of aggregate demand (AD) are Consumer Expenditure (C), investment by businesses (I), government expenditure (G), and Net Exports (NX), which is shown by following equation:
AD = C + I + G + NX
Aggregate Supply = Aggregate Demand
Also aggregate demand is equal to aggregate supply which is national income...
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Therefore, changes in any components on the right hand side can change the level of economic activity (Dixon & O’Mahony, 2004, pg.129). That means an increase in investment can increase aggregate demand then causing an upturn in the level of economic growth, inversely, a decrease in investment can lead to a downturn...
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