Question : Which of the following is not a component of aggregate demand?
Option 1: Consumption
Option 2: Investment
Option 3: Government spending
Option 4: Trade surplus
Correct Answer: Trade surplus
Solution : The correct answer is (d) Trade surplus
Trade surplus is not a component of aggregate demand. Aggregate demand represents the total demand for goods and services within an economy and is calculated by summing the components of consumption, investment, government spending, and net exports.
Consumption refers to the spending by households on goods and services, investment represents spending by businesses on capital goods, government spending refers to the expenditures made by the government on goods, services, and infrastructure, and net exports represent the difference between exports and imports.
Trade surplus, on the other hand, represents the excess of exports over imports, which affects the balance of trade but is not a direct component of aggregate demand.
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