#1
Which of the following is NOT a determinant of aggregate demand?
Foreign exchange rates
ExplanationForeign exchange rates do not directly determine aggregate demand.
#2
What effect does an increase in consumer confidence have on aggregate demand?
Increases aggregate demand
ExplanationIncreased consumer confidence leads to higher spending, boosting aggregate demand.
#3
How does an increase in exports affect aggregate demand?
Increases aggregate demand
ExplanationHigher exports contribute positively to aggregate demand, as they represent additional demand from foreign markets.
#4
Which of the following is a component of aggregate demand?
Total expenditure on investments
ExplanationInvestments contribute to total demand for goods and services in an economy.
#5
If the government increases its spending while keeping taxes constant, what happens to aggregate demand?
Aggregate demand increases
ExplanationIncreased government spending without tax hikes leads to higher overall demand.
#6
What is the multiplier effect in the context of aggregate demand?
An increase in aggregate demand due to an initial increase in spending
ExplanationInitial spending sets off a chain reaction, magnifying its impact on demand.
#7
In the AD-AS model, what does the Aggregate Demand curve represent?
Total planned spending on final goods and services
ExplanationIt showcases the total demand for all finished goods and services in an economy at various price levels.
#8
Which of the following is NOT a component of consumption expenditure in aggregate demand?
Investment in stocks
ExplanationInvestment in stocks is a financial activity, not a direct component of consumption expenditure.
#9
What is the relationship between the price level and aggregate demand, according to the wealth effect?
As the price level increases, aggregate demand decreases
ExplanationHigher prices reduce the real value of wealth, decreasing consumer spending and overall demand.
#10
How does a decrease in the value of the currency affect aggregate demand?
Increases aggregate demand
ExplanationA cheaper currency stimulates exports, raising overall demand.
#11
How does an increase in interest rates affect aggregate demand?
Decreases aggregate demand
ExplanationHigher interest rates discourage borrowing and spending, reducing overall demand.
#12
What is the main assumption of the aggregate demand curve?
Prices are fixed
ExplanationIt assumes that prices remain constant across different levels of output.
#13
What is the relationship between the exchange rate and net exports in aggregate demand?
As the exchange rate increases, net exports decrease
ExplanationA higher exchange rate makes exports more expensive, reducing foreign demand for goods and services.
#14
What is the primary objective of monetary policy in influencing aggregate demand?
To control inflation
ExplanationMonetary policy aims to regulate the money supply and interest rates to stabilize prices.
#15
According to the Keynesian perspective, what role does aggregate demand play in economic fluctuations?
It is the primary driver of economic fluctuations
ExplanationChanges in aggregate demand trigger cycles of economic expansion and contraction.