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.

Due to weakening of global economic activity, level of aggregate demand ______ in the economy.

Decreases

The correct answer is Option (2) → Decreases

The report states that global economic activity weakened and that inflation remained muted due to a slack in consumer demand. A slack in demand indicates that aggregate demand has fallen.

When global economic activity weakens:

• Consumer spending declines

• Investment slows down

• Trade contracts

All these factors lead to a fall in aggregate demand. Therefore, the level of aggregate demand decreases in the economy.