Topic Questions (EASY): Aggregate Demand, Aggregate Supply Analysis

Which of the following correctly identifies the components of aggregate demand?

Consumption + investment + government spending + (exports – imports)

Consumption + investment + taxation – (exports – imports)

Consumption + saving + taxation – (exports – imports)

Consumption + saving + taxation + (exports – imports)

If the government plans to raise income tax rates, how might an economist predict the new equilibrium point on a diagram representing a country's initial equilibrium at X?

A

B

C

D

The diagram shows changes in aggregate demand (AD) and aggregate supply (AS) in an economy over a year. What caused the increase in the general price level?

Increase in consumer spending

Increase in taxes on company profits

Decrease in government-financed projects

Increase in costs of raw materials

If major economies like the US and Japan increase government spending as suggested by the OECD, what impact would this have on the aggregate demand (AD) curve in these countries?

Move along the AD curve to the left

Move along the AD curve to the right

Move the AD curve to the left

Move the AD curve to the right