Understanding Aggregate Demand

The video explores the aggregate demand curve, explaining why it slopes downward due to factors like the wealth effect, interest rates, and exports. It discusses how changes in consumption, investment, government spending, and net exports can shift the aggregate demand curve. The video also examines the impact of tax policies and government spending on aggregate demand, emphasizing the components of GDP and their influence on economic activity.

What is one reason the aggregate demand curve is downward sloping?

• The wealth effect

• The price effect

• The substitution effect

• The income effect

How do lower interest rates affect investment and GDP?

• They increase investment and GDP

• They decrease investment and GDP

• They have no effect on investment and GDP

• They only affect GDP, not investment

What are the components of GDP that can cause the aggregate demand curve to shift?

• Government spending, imports, and savings

• Consumption, savings, and imports

• Consumption, investment, government spending, and net exports

• Investment, savings, and exports

How does a tax cut without a corresponding government spending cut affect aggregate demand?

• It decreases aggregate demand

• It shifts aggregate demand to the left

• It shifts aggregate demand to the right

• It has no effect on aggregate demand

What happens to aggregate demand if there is a tax increase without increased government spending?

• Aggregate demand shifts to the right

• Aggregate demand shifts to the left

• Aggregate demand remains unchanged

• Aggregate demand increases

What might cause an increase in investment, shifting the aggregate demand curve?

• An increase in interest rates

• A newly discovered industry

• A new tax on investments

• A decrease in government spending

How does increased government spending affect the aggregate demand curve?

• It has no effect on the curve

• It decreases the curve

• It shifts the curve to the left

• It shifts the curve to the right

What effect do increased net exports have on aggregate demand?

• They decrease aggregate demand

• They have no effect on aggregate demand

• They increase aggregate demand

• They shift aggregate demand to the left

If a country starts importing more than exporting, what happens to aggregate demand?

• Aggregate demand increases

• Aggregate demand decreases

• Aggregate demand remains unchanged

• Aggregate demand shifts to the right

What is a potential result of a government incurring more debt to increase spending?

• Aggregate demand shifts to the left

• Aggregate demand shifts to the right

• Aggregate demand decreases

• Aggregate demand remains unchanged