Read the passage carefully and answer the questions based on the passage:

Aggregate Demand and Its Components

Consumption may denote not what people have actually consumed in a given year, but what they had planned to consume during the same period. Similarly, investment can mean the amount a producer plans to add to her inventory. It may be different from what she ends up doing. The planned values of the variables are called their ex ante measures. The most important determinant of consumption demand is household income. A consumption function describes the relation between consumption and income. The simplest consumption function assumes that consumption changes at a constant rate as income changes. Of course, even if income is zero, some consumption still takes place. Since this level of consumption is independent of income, it is called autonomous consumption. The induced component of consumption, cY shows the dependence of consumption on income.

Which one is not the component of a aggregate demand for final goods?

Price

The correct answer is Option (1) → Price

The components of Aggregate Demand (AD) for final goods in an economy are:

1. Consumption (C): Spending by households on goods and services.

2. Investment (I): Spending by firms on capital goods (like machinery, buildings) and by households on new housing.

3. Government Spending (G): Spending by the government on goods and services.

4. Net Exports (NX): Exports (X) minus Imports (M).

Therefore, the formula for Aggregate Demand is written as: AD = C + I + G + (X - M)

Price is not a component of aggregate demand. Instead, it influences the level of aggregate demand but is not itself a part of the components.