Take this Exam: A-Level Economics: Aggregate Demand and Supply | Zestly

Question 1

What is the primary effect of a positive demand-side shock on an economy already operating at full capacity in the classical model?

Accepted Answer

An increase in the price level with no change in real GDP

Question 2

Which of the following are considered 'leakages' from the circular flow of income?

Accepted Answer

Savings

Question 3

How does an increase in the exchange rate typically affect the aggregate demand (AD) curve in an open economy?

Accepted Answer

It shifts AD to the left by making exports more expensive and imports cheaper

Question 4

Which of the following accurately describes the 'wealth effect' as a determinant of consumption?

Answer

An increase in the value of assets, such as housing or stocks, leads to higher consumer spending

Answer

A rise in interest rates encourages consumers to spend more from their savings

Answer

A decrease in government spending leads to an increase in private consumption

Answer

An increase in the price level reduces the real value of money, increasing consumption

Question 5

What is the consequence of a supply-side shock that shifts the LRAS curve to the right?

Answer

An increase in the price level

Answer

A decrease in the price level

Answer

A decrease in the potential output of the economy

Answer

An increase in the potential output of the economy

Answer

No change in the long-run equilibrium