Aggregate Demand Quiz

What is the main focus of the aggregate expenditure (AE) model?

• Changes in expenditure

• Changes in technology

• Changes in labor force

• Changes in capital stock

What is a major weakness of the AE model?

• It includes the supply side

• It ignores the supply side

• It focuses on technology changes

• It considers labor force changes

What does the aggregate demand (AD) curve represent?

• Total supply in the economy

• Total spending in the economy

• Total savings in the economy

• Total investment in the economy

What is the formula for Aggregate Demand (AD)?

• AD = C + I + G + NX

• AD = C + I + G + T

• AD = C + S + G + NX

• AD = C + I + S + NX

Which effect explains the negative relationship between aggregate demand and price level?

• Wealth effect

• Supply effect

• Labor effect

• Technology effect

What is the impact of a rise in the price level on interest rates?

• Interest rates decrease

• Interest rates increase

• Interest rates remain the same

• Interest rates double

What does the y-axis of the AD curve show?

• Real GDP

• Price level

• Inflation rate

• Interest rate

What is the effect of a decrease in the price level on total spending in the economy?

• It causes an increase in total spending.

• It causes a decrease in total spending.

• It has no effect on total spending.

• It causes total spending to remain constant.

What happens to the aggregate demand curve if there is an increase in business confidence?

• The curve shifts to the left.

• The curve shifts to the right.

• The curve remains unchanged.

• The curve becomes vertical.

What is the effect of an increase in taxes on the aggregate demand curve?

• The curve shifts to the left.

• The curve shifts to the right.

• The curve remains unchanged.

• The curve becomes vertical.