Practice Effect Of An Autonomous Change In Aggregate Demand On Income And Output (4.3.2)

Practice: Effect of an Autonomous Change in Aggregate Demand on Income and Output

Lesson 4.3.2Determination of Income and Employment

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9 questions

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2 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is an autonomous change in aggregate demand?
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Think about changes not influenced by economic performance.
Question 2.
What does the term 'excess demand' mean?
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Consider what happens when people want to buy more than what's available.
3Question 3.
What happens to equilibrium income when aggregate demand increases?
- It decreases
- It remains the same
- It increases
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Consider how demand changes affect production.
4Question 4.
True or False: The Paradox of Thrift suggests that increasing savings always leads to higher total savings.
- True
- False
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Think about individual actions in a collective economic sense.
Question 5.
Suppose the marginal propensity to consume (MPC) is 0.9, and there is an initial increase in autonomous investment of 20. Calculate the total impact on equilibrium income.
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Focus on the formula for the multiplier effect.
Question 6.
Discuss the potential consequences of a sudden, widespread shift to saving more on consumer spending and overall economic activity.
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Think about how individual decisions collectively shape the economy.

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