#1
Which of the following is NOT a determinant of aggregate demand?
Supply-side policies
ExplanationSupply-side policies focus on influencing the production side of the economy, not directly impacting aggregate demand.
#2
An increase in consumer confidence will likely result in:
An increase in aggregate demand
ExplanationHigher consumer confidence leads to increased spending, hence raising aggregate demand.
#3
Which of the following represents an autonomous component of aggregate demand?
Consumption
ExplanationAutonomous components are not influenced by changes in income, like consumption spending.
#4
If the exchange rate of a country's currency decreases, what effect does it have on aggregate demand?
Increases aggregate demand
ExplanationA lower exchange rate makes exports cheaper, stimulating demand for domestic goods abroad, hence increasing aggregate demand.
#5
What happens to aggregate demand when there is an increase in government spending?
Aggregate demand increases
ExplanationGovernment spending injects more money into the economy, directly increasing aggregate demand.
#6
Which of the following factors is likely to cause a shift in the aggregate demand curve?
Changes in consumer tastes
ExplanationShifts in consumer preferences affect spending patterns, causing changes in aggregate demand.
#7
Which of the following would NOT lead to a shift in the aggregate demand curve?
A change in production technology
ExplanationChanges in production technology affect the supply side, not directly influencing aggregate demand.
#8
Which of the following is an example of a fiscal policy aimed at increasing aggregate demand?
Reducing income tax rates
ExplanationLower income taxes leave consumers with more disposable income, boosting spending and aggregate demand.
#9
If there is an increase in the availability of credit, what effect does it have on aggregate demand?
Increases aggregate demand
ExplanationMore available credit encourages borrowing and spending, hence boosting aggregate demand.
#10
Which of the following would most likely lead to a decrease in consumer spending and a subsequent decrease in aggregate demand?
A decrease in consumer confidence
ExplanationLower consumer confidence reduces spending as people become more cautious, thereby decreasing aggregate demand.
#11
If there is a decrease in the level of business investment, what impact does it have on aggregate demand?
Aggregate demand decreases
ExplanationLess investment means fewer purchases of capital goods, leading to decreased aggregate demand.
#12
Which of the following represents a component of planned investment in the aggregate demand equation?
Residential construction
ExplanationInvestment in residential construction is part of planned investment and contributes to aggregate demand.