Question

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     There are four components (variables) of aggregate demand, but in my opinion investment is the most important component in improving GDP growth. Investment is deemed as the expenditure on capital goods – for example, new machines, offices, new technology. Investment is the second of the four components of aggregate demand, it is the spending by firms on capital, not households. However, it is said that investment is also the most volatile component of AD. An increase in investment shifts AD to the right in the short run and helps improve the quality and quantity of factors of production in the long run. The factors of production are land, labour, capital, and entrepreneurship. They are the inputs needed for supply. Mainly, the factors of production consist of any resource that is used in the creation of a good or service.      There are four components (variables) of aggregate demand, but in my opinion investment is the most important component in improving GDP growth. Investment is deemed as the expenditure on capital goods – for example, new machines, offices, new technology. Investment is the second of the four components of aggregate demand, it is the spending by firms on capital, not households. However, it is said that investment is also the most volatile component of AD. An increase in investment shifts AD to the right in the short run and helps improve the quality and quantity of factors of production in the long run. The factors of production are land, labour, capital, and entrepreneurship. They are the inputs needed for supply. Mainly, the factors of production consist of any resource that is used in the creation of a good or service.

Answer 1

No, I don't agree with the fact that out of four of the component (variables) of aggregate demand, the investment is the most important one. As consumption, government spending, net export and investment these are the four components. And in a survey it's shown that consumption has 61% contribution over the aggregate demand and then government spending by 23% and then comes investment by 15% and at last net export by 1%. So it's best clear that consumption is the most important component of the aggregate demand.

It because the household consumption the way which generates demand as there is more consumers attracted and likely to buy the product there will be more generation of demand which leads to an increase in production which leads to increase in supply of the commodity and where by there will be an increase in price of the product after a current time period.  

which will help in increase in the income of the producer and by which they will attract more investment from out side and increase in there technology, quantity and the quality of the product.

so as per me the Consumption is the important and the base component out of the four components of aggregate demand

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