ECONOMICS
AGGREGATE DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
aggregate demand will increase
|
|
|
aggregate demand will decrease
|
|
|
there will be no change in aggregate demand or supply
|
|
|
aggregate supply will increase
|
|
|
aggregate supply will decrease
|
Detailed explanation-1: -When interest rates rise, it becomes more “expensive” to borrow money. That borrowed money would typically go toward consumer expenditures and capital investment, and so these two sectors diminish under higher interest rates. Therefore aggregate demand decreases, per the equation.
Detailed explanation-2: -The correct answer to the given question is option c. An increase in income taxes. An increase in income taxes leads to decrease in disposable income for consumers thereby dampening the aggregate demand for goods and services.
Detailed explanation-3: -Answer and Explanation: The correct answer is A. A decrease in price level. Aggregate demand shifts favorably when the money supply increases and enable more consumer purchasing power.
Detailed explanation-4: -The Effect of Interest Rates on Aggregate Demand If interest rates decline, there will be an opposite effect. Individuals and businesses want to borrow more money at lower interest rates and invest this money in capital and consumer purchases. Therefore aggregate demand will increase.