Aggregate Demand

Question 1

What is aggregate demand

Answer 1

The total level of demand for the goods and services produced within a country at any given price level

Question 2

What is the formula for aggregate demand

Answer 2

C+I+G+(X-M)

Question 3

what are the components of aggregate demand

Answer 3

.household spending on goods and services C
.investment in capital stock I
.gov expenditure on public services G
.exports-imports (X-M)

Question 4

What is the Y axis of the AD graph supposed to be

Answer 4

General Price Level

Question 5

What is the X axis for the AD graph supposed to be

Answer 5

Real GDP (output/national income)

Question 6

What does a AD graph look like

Answer 6

It has a straight line, a top to bottom slope

Question 7

What happens if there is a rise in the general price level

Answer 7

There is a contraction of AD

Question 8

What happens of there is a fall in the general price level

Answer 8

There will be an expansion of AD

Question 9

What is the accelerator effect

Answer 9

Increased consumption demand —> firms get close to capacity —> firms invest to meet rising demand