Economic Growth and Consumer Spending Quiz
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Questions and Answers

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 (correct)
  • Long-run aggregate supply curve
  • Aggregate demand curve
  • Short-run aggregate supply curve

    • How does an increase in oil prices impact the short-run aggregate supply curve?

  • Does not affect the curve
  • Shifts it to the right
  • Shifts it to the left (correct)
  • Causes a parallel shift

    • What is the result of positive economic growth on the natural level of real GDP?

  • Shifts the natural level of real GDP
  • Increases the natural level of real GDP (correct)
  • Has no impact on the natural level of real GDP
  • Decreases the natural level of real GDP

    • Which factor does NOT influence consumer spending according to the text?

    <p>Employment rate</p> Signup and view all the answers

    What government policies can affect consumer spending according to the text?

    <p>Interest rates and taxation</p> Signup and view all the answers

    Which factor is NOT considered a determinant of consumer spending according to the text?

    <p>Government funding for defense</p> Signup and view all the answers

    What is one assumption made when drawing the aggregate demand curve?

    <p>The government holds the supply of money constant.</p> Signup and view all the answers

    How does the wealth effect influence buyers' behavior in relation to the price level?

    <p>Buyers reduce their purchases as the price level rises.</p> Signup and view all the answers

    What is the reason behind the interest rate effect influencing the demand for real GDP?

    <p>Increased demand for money with a fixed supply causes interest rates to rise.</p> Signup and view all the answers

    How does a rise in the interest rate affect spending sensitive to interest rates according to the text?

    <p>It decreases spending.</p> Signup and view all the answers

    What is one reason for the inverse relationship between the price level and real GDP according to the text?

    <p>The wealth effect and interest rate effect.</p> Signup and view all the answers

    How does a decrease in the price level affect buyers' purchasing power according to the text?

    <p>Buyers become wealthier and purchase more goods and services.</p> Signup and view all the answers

    What does the aggregate demand (AD) represent?

    <p>Sum of consumer expenditure, investment spending, government purchases, and net exports</p> Signup and view all the answers

    Which component is NOT included in the calculation of Investment Spending (I)?

    <p>Expenditures of households on consumption goods</p> Signup and view all the answers

    What does the downward sloping aggregate demand curve indicate?

    <p>There is an inverse relationship between price level and quantity demanded of real GDP</p> Signup and view all the answers

    Which factor explains the downward slope of the aggregate demand curve through the wealth effect?

    <p>Inverse relationship between price level and real purchasing power</p> Signup and view all the answers

    What does the net exports component in the calculation of Aggregate Demand represent?

    <p>Difference between exports and imports</p> Signup and view all the answers

    Which factor does NOT directly influence the value of Aggregate Demand?

    <p>Price level of imports</p> Signup and view all the answers

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