Aggregate Demand

What is aggregate demand (AD)?

• The willingness and ability to purchase a product at a given price.

   

• The total spending on services in a period of time at a given price level.

• The total spending on goods and services in a period of time at a given price level.

• The total demand for a product in an industry.

Which of the following are the correct axis labels for an aggregate demand diagram?

• y-axis: Average price level ($), x-axis: Quantity

• y-axis: Real output, x-axis: Average price level ($).

• y-axis: Quantity, x-axis: Average price level ($).

• y-axis: Average price level ($), x-axis: Real output

Which of the following is not a component of aggregate demand?

• Investments

• Savings

• Consumption

• Government spending

When does induced investment occur?

• Firms save money in order to spend on capital in the future.

• Firms spend on capital in order to maintain the productivity of their existing capital.

• Firms offer new shares to existing shareholders.

• Firms spend on capital to increase their output in response to higher demand in the economy.

Which of these is the formula for aggregate demand?

• C+I

• C+I+G

• C+I+G+X

• C+I+G+(X-M)

Which of these will cause the AD curve to shift to the right?

• An increase in house prices.

• An increase in income tax.

• An increase in consumer uncertainty about the economic future.

• An increase in interest rates.

Which one of the following will not lead to an increase in investment?

• A reduction in business confidence.

• A reduction in business taxes.

• A reduction in interest rates.

• A reduction in corporate indebtedness.

What are net exports?

• The difference between the quantity of exports and the quantity of imports.

• The quantity of total exports in an economy.

• The value of total exports in an economy.

• The difference between export revenue and import expenditure.

Which of the following would be likely to lead to a fall in the level of exports?

• An increase in foreign incomes.

• An increase in inflation rates among trading partners.

• An increase in free trade.

• An increase in the exchange rate.

Which of the following would be likely to lead to a fall in the level of imports?

• An increase in tariffs.

• An increase in a country’s national income.

• An increase in the interest rate.

   

• An increase in the exchange rate.