Aggregate Demand Quiz

What is the least significant part of AD?

• Net exports

• Consumption

• Investment

• Government spending

What is the substitution effect?

• Higher UK prices lead to more imports and fewer exports

• Higher UK prices lead to more exports and fewer imports

• Lower UK prices lead to more imports and fewer exports

• Lower UK prices lead to more exports and fewer imports

What happens to AD when net exports decrease?

• AD contracts

• AD expands

• AD remains constant

• AD fluctuates

How does the interest rate effect influence aggregate demand (AD)?

• Rising prices decrease interest rates, increasing AD.

• Rising prices increase interest rates, causing AD to contract.

• Rising prices have no effect on interest rates.

• Rising prices decrease interest rates, causing AD to contract.

What happens to AD if there is a fall in the rate of rise of consumption?

• AD will decrease significantly.

• AD will still increase but by not as much.

• AD will remain unchanged.

• AD will decrease slightly.

What happens to interest rates when prices increase?

• Interest rates decrease.

• Interest rates remain unchanged.

• Interest rates increase.

• Interest rates fluctuate randomly.

What does MPS stand for in the context of consumer spending?

• Marginal Propensity to Spend

• Marginal Propensity to Save

• Maximum Potential Savings

• Minimum Possible Spending

How does a rise in real house prices affect consumer spending?

• Decreases spending

• Increases spending

• Has no effect on spending

• Stops spending

What happens to consumption when share prices rise?

• Consumption decreases

• Consumption increases

• Consumption remains the same

• Consumption stops

How does the distribution of income affect consumption?

• No effect on consumption

• Increases consumption for all

• Affects consumption based on income levels

• Decreases consumption for all