Which of the following are components of aggregate demand?

(A) Autonomous Investment
(B) Autonomous Consumption
(C) Induced investment
(D) Induced consumption

Choose the correct answer from the options given below:

(A), (B), (C) and (D)

The correct answer is Option (3) → (A), (B), (C) and (D)

Aggregate Demand (AD) refers to the total planned expenditure on final goods and services in an economy at a given level of income. It consists of both autonomous and induced components of consumption and investment.

• (A) Autonomous Investment: Investment independent of income levels (e.g., government or infrastructure investment).

• (B) Autonomous Consumption: Basic consumption that occurs even when income is zero.

• (C) Induced Investment: Investment that increases as income or output rises.

• (D) Induced Consumption: Consumption that rises with higher income.

Hence, all four components — autonomous and induced, both in consumption and investment — form part of aggregate demand.

Note: The given answer has been retained as per the officially accepted NTA answer key. In hindsight, the given answer appears to differ from the simplified NCERT. As per the NCERT two-sector model, aggregate demand is specifically expressed as:

AD = Autonomous Consumption + Autonomous Investment + Induced Consumption ($AD = \bar{C} + \bar{I} + cY$)

(C) Induced Investment: While the simplified model in NCERT assumes investment is autonomous $(\bar{I})$ for "simplicity" , the chapter acknowledges that in reality, investment is affected by variables other than income, such as interest rates and credit availability. In a broader economic context beyond the simplified two-sector model, investment that responds to changes in economic conditions is considered "induced."

Thus,  NCERT assumes investment to be autonomous for simplicity and does not separately include induced investment in the aggregate demand equation. Therefore, students referring strictly to the NCERT expression may reasonably prefer Option (1), since only Autonomous Investment, Autonomous Consumption, and Induced Consumption are explicitly reflected in the formula.

However, from a broader macroeconomic perspective, induced investment is also considered a component of aggregate demand, which is why Option (3) has been accepted in the answer key.