What part of aggregate demand would you say is the most volatile component and relate this to the economy today.
There are four aggregate demand determinants that are grouped by the expenditure categories, such that: investment expenditures, consumption expenditures, net expenditures, government spending. Among these determinants, investment expenditure component seems to be the most erratic.
Investment expenditures are grouped in 5 categories as it follows: interest rates, expectations, physical wealth, technologies, capital prices.
The higher the interest rates are, the fewer investments are made and the aggregate demand decreases.
The capital price is also a determinant factor in investment expenditure because the more increased the price of capital is, the more decreased the investment expenditures and aggregate demand are.
New technologies are also a determinant factor that influences the investment expenditures, increasing them.
The boost of aggregate demand also occurs when the business sector identifies a future economical improvement and decides to increase the investments.
As a conclusion, the cyclical behavior of aggregate demand is given by the increased unpredictable conduct of investment expenditure component.