Pearson Edexcel International AS Level · Economics (XEC11)

Aggregate demand (AD): Practice Questions

4 multiple-choice questions marked as you go, and 2 written questions with worked solutions. All on Aggregate demand (AD).

6 questions12 marksFree, no account

Question 1

1 mark

In the components of aggregate demand ( $AD = C + I + G + (X - M)$), which of the following is defined as the total spending by firms on capital goods?

Question 2

1 mark

An economy has a marginal propensity to consume (MPC) of 0.6 and a marginal propensity to import (MPM) of 0.1. If the marginal propensity to tax (MPT) is 0.1, what is the value of the multiplier?

Question 3

1 mark

If the price of an economy's currency appreciates significantly on the foreign exchange market, which of the following describes the most likely impact on the short-run aggregate supply (SRAS) and aggregate demand (AD) curves?

Question 4

1 mark

The table shows the components of Aggregate Demand for an economy (\$ billions):

Consumption: 300
Investment: 80
Government Spending: 120
Exports: 60
Imports: 75

If the government reduces the rate of corporation tax, leading to a $15\%$ increase in investment, and all other components remain unchanged, what is the new total value of Aggregate Demand?

Question 5

2 marks

Identify the four components of aggregate demand (AD) in an open economy.

Write your answer out first, then check it against the worked solution.

Question 6

6 marks

Evaluate how a sustained increase in house prices may shift the aggregate demand (AD) curve through the wealth effect.

Write your answer out first, then check it against the worked solution.

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