An increase in expected future income will
A) increase both aggregate demand and aggregate supply.
B) decrease both aggregate demand and aggregate supply.
C) increase aggregate supply only.
D) increase aggregate demand only.
E) not affect aggregate demand.

Question

Quizplus · Accepted Answer

An increase in expected future income will increase aggregate demand only because consumers will have more confidence to spend their money now, assuming they will have more income in the future. This will lead to an increase in demand for goods and services, thus increasing aggregate demand.

An Increase in Expected Future Income Will