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

Question 1

In the context of the aggregate demand formula $AD = C + I + G + (X - M)$, which of the following best describes the impact of a rise in the marginal propensity to import (MPM) on the multiplier effect?

Accepted Answer

It decreases the multiplier because it acts as a larger leakage from the circular flow of income

Question 2

Which of the following factors are primary determinants of private sector investment in an economy?

Accepted Answer

The level of business confidence and animal spirits

Question 3

If an economy is operating on the horizontal section of the Keynesian long-run aggregate supply (LRAS) curve, what is the expected impact of an increase in aggregate demand on the price level and real output?

Accepted Answer

Real output will increase, but the price level will remain constant

Question 4

Which of the following scenarios would cause a shift of the short-run aggregate supply (SRAS) curve to the left?

Answer

A significant increase in global oil prices

Answer

A decrease in the corporate tax rate

Answer

An increase in labor productivity

Answer

A sharp rise in nominal wages across the economy

Answer

An increase in the total labor force

Question 5

Calculate the final increase in national income if the government increases spending by £50 billion and the marginal propensity to consume (MPC) is 0.8.

Answer

£50 billion

Answer

£100 billion

Answer

£200 billion

Answer

£250 billion