Aggregate Demand Quiz

Which of the following describes the macroeconomic concept of aggregate demand (AD)?

• Total demand in an economy over a period of time

• Total spending on goods and services in an economy over a period of time at a given price level

• Total amount of goods and services demanded in an economy over a period of time

• Sum of individual consumer demand for a good or service

The aggregate demand curve slopes downwards. Which of the following is incorrect about the downward sloping demand curve?

• There is an inverse relationship between the price level and real national income

• Aggregate demand curve shows total demand at each and every price level

• Aggregate demand shows the quantity demanded at every price

• As the price level falls aggregate demand increases

Which of the following is not an explanation of why the aggregate demand curve slopes downwards?

• Wealth effect

• Interest rate effect

• Income tax rate

• Net export effect

Which one of the following would cause aggregate demand to fall?

• A decrease in unemployment

• A fall in the demand for imported goods and services

• A fall in government expenditure on defence and transport

• A rise in productivity

The movement down the AD curve is caused by which of the following?

• A rise in government spending

• A rise in investment spending

• A fall in aggregate supply

• A fall in the general price level

Aggregate demand in an open economy is equal to

• C + S + (X – M)

• C + I + S + T

• C + (I – G) + X - M

• C + I + G + X - M

The largest and most stable component of aggregate demand in the UK is

• saving

• government spending

• consumption

• net exports

Which of the following is the most volatile component of aggregate demand?

• Investment

• Government spending

• Consumption

• Imports

Which statement below would best describe what has happened in the economy in the diagram?

• A. A rise in income tax rates followed by a depreciation in the exchange rate

• B. A fall in income tax rates followed by a rise in producer confidence

• C. A fall in borrowing costs followed by a depreciation in the exchange rate

• D. An appreciation of the exchange rate followed by a rise in income taxes

The diagram below shows a shift in aggregate demand. Which of the following changes is the most likely cause of this shift?

• A. A rise in the savings ratio

• B. A rise in government spending

• C. A rise in indirect taxes

• D. A rise in business confidence