IB ECONS (KHÁNH VI)

What does aggregate demand (AD) refer to in macroeconomics?

• The total supply of goods and services in the economy
• The total planned spending on domestically produced goods and services at various average price levels
• The actual expenditure recorded over a fiscal year
• The demand for imported goods only

Why is the aggregate demand curve downward sloping?

• Because higher prices lead to increased export earnings
• Because a lower average price level increases the purchasing power of households, firms, and the government, boosting spending
• Because production costs decrease at higher prices
• Because government spending is unaffected by price changes

Which formula correctly represents aggregate demand?

• AD = C + I + G + (M - X)
• AD = C + I + G + (X - M)
• AD = C - I + G + (X - M)
• AD = C + I - G + (X - M)

In the aggregate demand formula (AD = C + I + G + (X - M)), what does “C” stand for?

• Capital expenditure
• Consumption expenditure
• Corporate taxes
• Cost of production

Which component is typically the largest part of aggregate demand?

• Investment expenditure
• Government spending
• Consumption expenditure
• Net exports

How are net exports calculated in the AD formula?

• Exports plus imports
• Imports minus exports
• Exports minus imports
• Exports multiplied by imports

An increase in consumer confidence is likely to have what effect on the AD curve?

• Shift it leftwards
• Shift it rightwards
• Make it vertical
• No effect at all

What is the likely effect on aggregate demand if interest rates rise, ceteris paribus?

• AD shifts rightward
• AD shifts leftward
• AD remains unchanged
• AD becomes horizontal

How does aggregate demand (AD) differ from Gross Domestic Product (GDP)?

• GDP measures actual expenditure, whereas AD measures planned or expected expenditure
• GDP includes only consumption spending, whereas AD includes all components
• There is no difference between GDP and AD
• AD is calculated quarterly while GDP is annual

In an AD-AS diagram, what is typically plotted on the x-axis?

• Average price level
• Nominal GDP
• Real GDP (or National output)
• Inflation rate