The aggregate, demand in a two-sector economy model is:

Correct option is D

(d) C + I

In a two-sector economy (household and firms), aggregate demand is the sum of consumption (C) and investment (I). There is no government or foreign sector involved.

Information Booster:

• C = Consumption (household spending).
• I = Investment (capital formation by firms).
• Two-sector model ignores government and external trade.
• S + I is a savings-investment identity, not demand.
• C - S is not an appropriate formula.
• Keynesian economics emphasizes the role of aggregate demand.

Additional Information:

• Aggregate demand expands with government spending.
• Exports increase aggregate demand.
• Recession occurs when aggregate demand declines.