ECONOMICS (CBSE/UGC NET)

Previous
Next

ECONOMICS

AGGREGATE DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Which of the following events will increase the Aggregate Demand in the economy. Check all that apply.
A
The government increasing Income Tax
B
The Fed lowering interest rates
C
A rise in the cost of raw material
D
A supply shock like a new production technology
E
An increase in consumer confidence
Explanation: 

Detailed explanation-1: -Solution Expansion of money supply will lead to a decrease in the interest rate thus stimulating aggregate demand .

Detailed explanation-2: -An increase in government spending and an increase in consumer confidence can boost the aggregate demand in a given economy. Similarly, a decrease in interest rates reduces the cost of money, which in turn can cause an increase in consumer spending and a reduction in savings.

Detailed explanation-3: -Aggregate demand increases with increase in investment.

Detailed explanation-4: -Some typical ways fiscal policy is used to increase aggregate demand include tax cuts, military spending, job programs, and government rebates. In contrast, monetary policy uses interest rates as its mechanism to reach its goals.

There is 1 question to complete.
Previous
Next