Chapter Three: Aggregate Demand Analysis of Closed Economy Quiz

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What does aggregate demand represent in an economy?

Total amount of capital demanded by economic agents

Total amount of services demanded by economic agents

Total amount of money demanded by economic agents

Total amount of goods demanded by economic agents (correct)

How would you describe the relationship between quantity of output demanded and the aggregate level of prices?

Random relationship

Inverse relationship (correct)

No relationship

Direct relationship

In the context of aggregate demand, what happens to AD when prices decrease?

AD remains constant

AD increases (correct)

AD becomes unpredictable

AD decreases

What effect does a decrease in price level have on real money balances?

Real money balances increase Signup and view all the answers

Which component is not a part of the components of aggregate demand?

Inflation Spending (IS) Signup and view all the answers

What happens to real money balances when the price level is lower?

Real money balances are higher Signup and view all the answers

What is aggregate demand?

The total amount of goods demanded by economic agents in the economy Signup and view all the answers

How does a decrease in price level affect aggregate demand?

Increases aggregate demand Signup and view all the answers

In the context of aggregate demand analysis, what happens when output is higher?

Consumers need higher real money balances Signup and view all the answers

Which component of aggregate demand represents foreign spending?

Net export (NX) Signup and view all the answers

What happens to aggregate demand when the price level increases?

Decreases as consumers can buy less Signup and view all the answers

How do real money balances change when the price level decreases?

Increase Signup and view all the answers

Chapter Three: Aggregate Demand Analysis of Closed Economy Quiz

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Questions and Answers

What does aggregate demand represent in an economy?

How would you describe the relationship between quantity of output demanded and the aggregate level of prices?

In the context of aggregate demand, what happens to AD when prices decrease?

What effect does a decrease in price level have on real money balances?

Which component is not a part of the components of aggregate demand?

What happens to real money balances when the price level is lower?

What is aggregate demand?

How does a decrease in price level affect aggregate demand?

In the context of aggregate demand analysis, what happens when output is higher?

Which component of aggregate demand represents foreign spending?

What happens to aggregate demand when the price level increases?

How do real money balances change when the price level decreases?

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