AD-AS Macroeconomic Equilibrium

Aggregate demand is calculated by which formula?

• AD = C + I - G + (X-M)

• AD = C + I + G - (X-M)

• AD = C + I + G + (M-X)

• AD = C + I + G + (X-M)

Which of the following is not a reason why the AD curve slopes downward?

• interest rate effect

• wealth effect

• net export effect

• income effect

Which of the following would cause AD to rise?

• An increase in the demand for imported goods and services

• An increase in unemployment

• An increase in government expenditure on defence and transport

• A decrease in labour productivity

Which of the following conveys the idea that when price levels are relatively high, people feel less affluent?

• Net export effect

• interest rate effect

• income effect

• wealth effect

The diagram below shows a movement along the AD curve from point a to point b. What could have caused this?

• A rise in government spending

• A rise in the value of exports

• A fall in the general price level

• A fall in SRAS

If average house prices fall, we would expect consumption to ________ because wealth ____________

• decline, increases

• decline, declines

• increase, decreases

• increase, increases

During periods of high real interest rates, households have an incentive to _________, and firms are more likely to _______ large capital investments.

• save, defer

• spend, expedite

• save, expedite

• spend, defer

Which of the following is a non-income determinant of consumption?

• wealth

• real interest rates

• consumer confidence

• all of the above

Which of the following is not a determinant of investment?

• Business confidence

• Expectations of future prices

• Wealth effect

• Real interest rates

Which of the following are determinants of net exports?

i. degree of protectionism

ii. falling incomes of trading partners

iii. wealth

iv. exchange rates

• i + ii

• iii + iv

• i + ii + iv

• i + ii + iii + iv