What does Aggregate Demand (AD) represent?

Quiz on Income & Spending

Quiz
•
Other
•
12th Grade
•
Medium
Talia Kambe
Used 1+ times
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38 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Total government spending
Total amount consumers wish to spend on goods and services
Total income earned by individuals
Total exports minus imports
Answer explanation
Aggregate Demand (AD) represents the total amount consumers wish to spend on goods and services in an economy. It reflects overall demand and is a key component in understanding economic activity.
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following is NOT a component of Aggregate Demand?
Net Savings (NS)
Government Spending (G)
Investment Spending (I)
Consumer Expenditure (C)
Answer explanation
Net Savings (NS) is not a component of Aggregate Demand. The components include Government Spending (G), Investment Spending (I), and Consumer Expenditure (C), which together represent total demand in the economy.
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What does the Marginal Propensity to Consume (MPC) indicate?
The level of government spending
The total income of the economy
The fraction of additional income spent on consumption
The total savings of consumers
Answer explanation
The Marginal Propensity to Consume (MPC) measures the fraction of additional income that households spend on consumption. Thus, the correct choice is 'The fraction of additional income spent on consumption'.
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the formula for calculating Disposable Income (DI)?
DI = National Income - Taxes
DI = National Income + Transfers
DI = National Income - (Taxes + Transfers)
DI = National Income + Taxes
Answer explanation
Disposable Income (DI) is calculated by subtracting both taxes and transfers from national income. Thus, the correct formula is DI = National Income - (Taxes + Transfers). This reflects the income available for spending or saving.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which method is NOT used to measure GDP?
Consumption Method
Expenditure Method
Income Method
Output Method
Answer explanation
The Consumption Method is not a recognized approach for measuring GDP. The correct methods are the Expenditure Method, Income Method, and Output Method, which focus on different aspects of economic activity.
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What does the term 'Injections' refer to in the Circular Flow of Income?
Imports and exports
Savings and taxes
Government transfer payments
Expenditures on domestic goods from outside the household sector
Answer explanation
In the Circular Flow of Income, 'Injections' refer to expenditures on domestic goods from outside the household sector, such as investments, government spending, and exports, which stimulate economic activity.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the relationship between Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS)?
MPC + MPS = 2
MPC + MPS = 1
MPC * MPS = 1
MPC - MPS = 1
Answer explanation
The Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) represent the portions of additional income that are consumed and saved, respectively. Since all income must be either consumed or saved, MPC + MPS = 1.
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