Select which of the following is not one of the components of Aggregate demand for final goods?
Answer & explanation
Correct answer: option 3
The answer is Ex - post consumption.
Aggregate demand is the total demand for goods and services in an economy at a given price level. It is made up of four components:
- Ex-ante consumption: Consumption spending planned by households based on their current income and expectations about future income.
- Ex-ante investment: Investment spending planned by firms based on their expectations about future profitability.
- Government spending: Government purchases of goods and services.
- Net exports: Exports minus imports.
Ex-post consumption is the actual consumption spending by households, which may differ from ex-ante consumption due to unexpected changes in income or wealth. Therefore, ex-post consumption is not a component of aggregate demand for final goods.