Read the following report carefully and answer the questions on the basis of the same:

Along with the weakening of global economic activity, inflation the world over also remained muted in 2019. Inflation softened in advanced and emerging economies reflecting a slack in consumer demand. From the supply side, lower energy prices in 2019 also contributed to softening of inflation. In India, inflation rose slightly to 4.1% in April - December 2019, after a sharp decline from 5.9% in 2014 to 3.4% in 2018.

Which of the following does not lead to fall in Aggregate Demand?

Fall in imports.

The correct answer is Option (3) → Fall in imports.

Aggregate Demand (AD) includes the total spending on goods and services in an economy and is composed of:

AD = C + I + G + (X - M)
where:
C = Consumption expenditure
I = Investment expenditure
G = Government expenditure
X = Exports
M = Imports

• Fall in private consumption expenditure (C): A decrease in the spending by households on goods and services directly reduces the 'C' component, thus leading to a fall in AD.

• Fall in exports (X): A decrease in goods and services sold to other countries directly reduces the 'X' component, thus leading to a fall in AD.

• Fall in imports (M): Imports are goods and services purchased from other countries. When imports fall, it means that either less foreign goods are being purchased, or more domestically produced goods are being consumed instead of foreign ones. A fall in imports (M) makes the net exports $(X-M)$ component less negative or more positive, which would actually increase (or at least not decrease) Aggregate Demand. It represents a shift in spending towards domestic goods.

• Fall in government expenditure (G): A decrease in spending by the government on goods and services directly reduces the 'G' component, thus leading to a fall in AD.