Quiz (graded)
Quiz (graded)
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Aggregate demand is the total demand for goods and services in the whole economy.
Lower interest rates encourage consumer spending and investment.
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Exports minus imports contribute towards total demand in the economy.
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Consumer expenditure is the biggest component of aggregate demand.
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What are the components of aggregate demand?
Government spending is primarily influenced by the economic situation, with more spending occurring during downturns or recessions due to automatic stabilizers and stimulus measures.
How do lower interest rates impact consumer spending?
How do automatic stabilizers impact government spending during economic downturns?
Profits earned by firms directly impact investment, with higher profits providing more funding for businesses to invest and expand.
Lower interest rates result in higher consumer spending as the return from saving decreases, prompting people to spend rather than save.
What role does the interest rate play in influencing a company's decision to invest in new projects, and how does this relate to the aggregate demand framework?
