What is the relation between aggregate demand and income?

The correct answer is Option 1: Positive relation

There is a positive relation between income and aggregate demand i.e. aggregate demand increases with the rise in income level. The curve has a positive slope. As income increases, households generally have more money to spend, leading to higher consumption. This increase in consumption raises aggregate demand. Additionally, higher income can lead to increased investment and government spending, further boosting aggregate demand. Hence, aggregate demand tends to rise as income rises.