Practice Aggregate Demand (ad) (2.2.2.1) - Chapter 2: Theory of Income and Employment

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6 sample questions

Question 1.
What does Aggregate Demand consist of?
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Think of the acronym CIGX.
Question 2.
True or False: Aggregate Demand increases when consumer confidence rises.
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Connection between consumer confidence and spending.
3Question 3.
What does Aggregate Demand include?
- A) Only government spending
- B) C + I + G + (X - M)
- C) Investment alone
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Recall the formula for Aggregate Demand.
4Question 4.
True or False: An increase in Aggregate Demand always leads to inflation.
- True
- False
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Consider the balance between AD and AS.
Question 5.
If the government increases its spending by $2 million and the MPC is 0.75, how much will the total increase in national income be?
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Use the multiplier formula to assist your calculation.
Question 6.
Discuss the potential impact of a recession on Aggregate Demand and the roles policy makers might take.
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Think about government strategies that boost economic activity during downturns.

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