Question : The aggregate demand (AD) is given by AD = C + I + G + X - M. If consumption (C) is INR 3,500, investment (I) is INR 2,000, government spending (G) is INR 1,500, exports (X) are INR 800, and imports (M) are INR 600, what is the aggregate demand?
Option 1: INR 4,200
Option 2: INR 4,700
Option 3: INR 5,200
Option 4: INR 7,200
Correct Answer: INR 7,200
Solution : The correct answer is (D) INR 7200
To calculate the aggregate demand (AD), we can substitute the given values of consumption (C), investment (I), government spending (G), exports (X), and imports (M) into the aggregate demand equation.
Given: C = INR 3,500, I = INR 2,000, G = INR 1,500, X = INR 800, M = INR 600
Substituting these values into the aggregate demand equation, we get:
AD = C + I + G + X - M
AD = 3500 + 2000 + 1500 + 800 - 600
AD = 7200
Therefore, the aggregate demand is INR 7,200.
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