Question : In which of the following ways is the aggregate demand function related to the consumption function?
I. They have the same slope C.
II. The aggregate demand function is parallel to the consumption function.
Option 1: Neither I nor II
Option 2: Only II
Option 3: Only I
Option 4: Both I and II
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Correct Answer: Both I and II
Solution : The correct option is Both I and II.
I. The aggregate demand function and the consumption function may have the same slope (C) as both involve the relationship between income and spending.
II. The aggregate demand function is parallel to the consumption function when other components like investment and government spending remain constant, reflecting their interdependence in determining overall economic demand.
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