18 Questions
What determines the equilibrium price level and equilibrium level of real GDP in an economy?
Intersection of aggregate demand and short-run aggregate supply curves
How does an increase in oil prices impact the short-run aggregate supply curve?
Shifts it to the left
What is the result of positive economic growth on the natural level of real GDP?
Increases the natural level of real GDP
Which factor does NOT influence consumer spending according to the text?
Employment rate
What government policies can affect consumer spending according to the text?
Interest rates and taxation
Which factor is NOT considered a determinant of consumer spending according to the text?
Government funding for defense
What is one assumption made when drawing the aggregate demand curve?
The government holds the supply of money constant.
How does the wealth effect influence buyers' behavior in relation to the price level?
Buyers reduce their purchases as the price level rises.
What is the reason behind the interest rate effect influencing the demand for real GDP?
Increased demand for money with a fixed supply causes interest rates to rise.
How does a rise in the interest rate affect spending sensitive to interest rates according to the text?
It decreases spending.
What is one reason for the inverse relationship between the price level and real GDP according to the text?
The wealth effect and interest rate effect.
How does a decrease in the price level affect buyers' purchasing power according to the text?
Buyers become wealthier and purchase more goods and services.
What does the aggregate demand (AD) represent?
Sum of consumer expenditure, investment spending, government purchases, and net exports
Which component is NOT included in the calculation of Investment Spending (I)?
Expenditures of households on consumption goods
What does the downward sloping aggregate demand curve indicate?
There is an inverse relationship between price level and quantity demanded of real GDP
Which factor explains the downward slope of the aggregate demand curve through the wealth effect?
Inverse relationship between price level and real purchasing power
What does the net exports component in the calculation of Aggregate Demand represent?
Difference between exports and imports
Which factor does NOT directly influence the value of Aggregate Demand?
Price level of imports
Test your knowledge on economic growth, determinants of consumer spending, and the impact of input goods on the economy. Understand how changes in productive resources and final goods affect real GDP levels.
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