If businesses believe consumption will increase six months from now, everything else held constant, and they begin to increase investment, what do you predict will happen to aggregate demand?

If businesses believe that consumption will increase six months from now and they start increasing investment, it will likely have a positive impact on aggregate demand. Aggregate demand refers to the total demand for goods and services in an economy, and it is determined by various factors, one of which is investment.

By increasing investment, businesses are essentially allocating more resources towards expanding their productive capacity, which can lead to an increase in output and employment. This increase in investment spending stimulates economic activity and can boost consumer spending as well. As a result, aggregate demand tends to increase, resulting in potentially higher economic growth and inflationary pressures.

To make this prediction, we can refer to the Keynesian theory of aggregate demand. According to this theory, an increase in investment leads to a multiplier effect, where each dollar of investment expenditure generates multiple dollars of increased income and spending. This increased spending further stimulates aggregate demand.

However, it's important to note that the actual impact on aggregate demand can vary due to other factors as well. For example, if there are other negative economic conditions or factors that offset the increase in investment, the impact on aggregate demand may be dampened.

Overall, if businesses believe consumption will increase and start increasing investment, it is likely to have a positive effect on aggregate demand.