Graphically, Aggregate Demand (AD) function can be obtained by vertically adding the _____ and _____.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → consumption, investment
The Aggregate Demand function shows the total demand (made up of consumption + investment) at each level of income. Graphically it means the aggregate demand function can be obtained by vertically adding the consumption and investment function.
Here, OM = $\bar C$
OJ = $\bar I$
OL = $\bar C$ + $\bar I$
The aggregate demand function is parallel to the consumption function i.e., they have the same slope c.
