Question

In: Economics

Which of the activities below would cause a shift in aggregate demand? a. Change in consumer...

Which of the activities below would cause a shift in aggregate demand?

	a.	Change in consumer spending
	b.	Change in business investments
	c.	Change in government spending
	d.	All of the above would cause a shift in aggregate demand

Deliberate changes in govenment spending is an example of:

	a.	Monetary policy
	b.	Fiscal policy
	c.	Both monetary and fiscal policy
	d.	Foreign policy

An increase in the world's economic prosperity will enable other countries to more easily buy our goods.

True

False

Adding spending will have a negative impact on the equililbrium GDP.

True

False

Expert Solution

Ans. 1. = (Option D) All of the Above would cause a shift in aggregate demand.

AD = C + I + G + NX

Aggregate Demand includes consumer spending, business investments, and government spending as well.

So, If any of these components changes then it would cause Aggregate Demand to Rise, causing a Shift in Aggregate Demand Curve.

Ans. 2. = (Option B) Fiscal policy

Government uses Fiscal Policy (Government Spending and Taxes) for Correcting the Fluctuations in the Economy or for influencing the Economy.

Ans. 3. = (Option A) True

Economic Prosperity means earning that size of money which is necessary for fulfilling all the needs.

When other countries become prosperous then they would would demand more goods. Hence, Exports from other countries like US would also Rise.

Ans. 4. = (Option A) True

AD = C + I + G + NX

C = Consumption Expenditure, This is spending by consumers on goods and services and it is a positive component of GDP.

I = Investment Expenditure, This is spending and it is a POSITIVE component of GDP. means it will Increase the GDP.

G = Government Spending, this is also a Positive component of GDP. It will Increase the GDP too.

Hence, Spending will have a Positive Impact on GDP.

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Rahul Sunny answered 2 years ago

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