Macro 3

Question 1

What are capital goods

Answer 1

goods used to make consumer goods

Question 2

What are consumer goods

Answer 2

goods and services which satisfy the needs and wants of consumers

Question 3

What is aggregate demand

Answer 3

The totals of all demands and expenditures in an economy at any given price in a given periods of time

Question 4

What is national expenditure a measure of

Answer 4

national income

Question 5

How is national expenditure measured

Answer 5

GDP

Question 6

What are the four components national expenditure is made up of

Answer 6

Consumption
Government spending
Investment
Exports-Imports

Question 7

What is on the y-axis on the AD curve

Answer 7

price level

Question 8

What is price level

Answer 8

the average level of prices in an economy

Question 9

How is price level measured

Answer 9

CPI - consumer price index

Question 10

What is the x-axis on the AD curve

Answer 10

real gdp

Question 10

What is the shape of the demand curve

Answer 10

Downward sloping

Question 10

What does the shape of the AD curve show

Answer 10

As prices rise, the spending power of households fall

Question 10

What is the equation for aggregate demand

Answer 10

C+I+G+(E-I)

Question 10

What is the wealth effect

Answer 10

If the price level falls, the purchasing power of wealth increases, so consumers will demand more. Firms will invest more as investment products are cheaper

Question 10

What is the interest rate effect

Answer 10

When price levels are low, interest rates tend to be low - this encourages investment and consumer spending

Question 10

International trade effect

Answer 10

As the price level falls, exports become cheaper so exports increase. Imports become more expensive. Net exports improve

Question 10

Income effect

Answer 10

As disposable income increases, consumption increases

Question 10

Consumer confidence effect

Answer 10

When consumers feel more confident in the economy, they will spend more and save less

Question 10

Tax effect

Answer 10

Increases in direct tax leads to a fall in consumers disposable income

Question 10

Unemployment effect

Answer 10

When unemployment rises, consumers will spend less and save more

Question 11

aggregate supply

Answer 11

The total output of producers of an economy at a given price at a given period of time

Question 12

what does the aggregate supply curve show

Answer 12

the relationship between price and output in an economy as a whole

Question 13

what are the determinants of SRAS

Answer 13

• Cost of production
• Price of related goods
• Subsidies