Aggregate Demand (Consumption factors)

What is disposable income?

• The total amount of money a household earns before taxes

• The amount of money that households have available for spending and saving after income taxes have been accounted for

• The total amount of money a household saves after expenses

• The amount of money a household needs to spend on necessities

Which of the following factors can lower interest rates and encourage spending?

• The Government raising interest rates

• Central banks raising interest rates

• Central banks lowering interest rates

• The Government lowering interest rates

What role does the central bank play in controlling inflation?

• It has no role in controlling inflation

• It controls inflation by adjusting government spending

• It controls inflation by regulating interest rates and money supply

• It controls inflation by setting tax rates

How does inflation impact the purchasing power of money?

• It increases the purchasing power of money

• It has no impact on the purchasing power of money

• It decreases the purchasing power of money

• It initially decreases then increases the purchasing power of money

What is the primary goal of monetary policy?

• To ensure high employment levels

• To maintain price stability

• To achieve a high trade surplus

• To ensure balanced government budgets

What effect does a decrease in the interest rate have on consumer borrowing and spending?

• It decreases consumer borrowing and spending

• It has no effect on consumer borrowing and spending

• It increases consumer borrowing and spending

• It initially increases then decreases consumer borrowing and spending

What is the primary function of fiscal policy?

• To regulate the stock market

• To control the money supply and interest rates

• To manage government spending and taxation

• To oversee banking and financial institutions

How does a country's trade deficit impact its currency value?

• It increases the currency value

• It decreases the currency value

• It has no impact on the currency value

• It initially decreases then increases the currency value

What is the effect of a high unemployment rate on a country's economy?

• It leads to higher consumer spending

• It increases the country's GDP

• It decreases the overall demand for goods and services

• It has no significant effect on the economy

How do changes in the exchange rate affect a country's exports?

• A stronger currency makes exports more competitive

• A weaker currency makes exports less competitive

• A stronger currency reduces the price of exports in foreign markets

• A weaker currency makes exports more competitive