Aggregate Demand Quiz

What does Aggregate Demand (AD) represent?

• The total supply of all goods and services in an economy.

• The total demand for all final goods and services in an economy.

• The total value of exports in an economy.

• The total government spending in an economy.

Which of the following is NOT a component of Aggregate Demand (AD)?

• Consumption demand (C)

• Investment demand (I)

• Government demand (G)

• Savings demand (S)

What does the formula AD = C + I + G + (X - M) represent?

• The formula for calculating GDP.

• The formula for calculating Aggregate Demand.

• The formula for calculating Net Exports.

• The formula for calculating Government Spending.

On a graph of the Aggregate Demand (AD) curve, what does the vertical axis represent?

• The quantity of goods and services demanded (real GDP).

• The price level (average prices of all goods and services).

• The total value of exports.

• The total government spending.

Why does the Aggregate Demand (AD) curve slope downward?

• Because higher prices lead to higher demand.

• Because lower prices lead to lower demand.

• Because higher prices reduce the quantity of goods and services demanded.

• Because lower prices increase the quantity of goods and services supplied.

What is the Wealth Effect in the context of the AD curve?

• When prices go up, people buy more because they feel wealthier.

• When prices go up, people buy less because their money has less value.

• When prices go down, people buy less because they feel poorer.

• When prices go down, people buy more because their money has more value.

What happens to Aggregate Demand (AD) when prices in our country go up, according to the Net Exports Effect?

• AD goes up because our goods and services become cheaper.

• AD goes down because our goods and services become more expensive.

• AD remains unchanged because exports and imports balance out.

• AD goes up because people buy more from other countries.

What is the Wealth Effect?

• When prices go up, people feel richer because their money buys more, so they spend more.

• When prices go up, people feel poorer because their money buys less, so they spend less.

• When prices go down, people feel poorer because their money buys less, so they spend less.

• When prices go down, people feel richer because their money buys more, so they spend more.

What does Purchasing Power refer to?

• The amount of money people have in their bank accounts.

• How much goods and services money can buy.

• The total amount of goods and services produced in a country.

• The total demand for goods and services in an economy.

What is the likely effect on total demand if prices go up a lot?

• People might spend more and buy more from other countries, increasing total demand.

• People might spend less and buy more from other countries, reducing total demand.

• People might spend more and buy less from other countries, increasing total demand.

• People might spend less and buy less from other countries, reducing total demand.