Components of Aggregate Demand
21 questions· page 1 of 3
In many countries increased government spending is regarded as a cause of economic growth. It is sensible, therefore, for a government to spend more to increase economic growth as it is good for its country.
To what extent do you agree with this argument?
Economic models have little practical relevance.
Discuss whether this is true of the analysis of how a fall in interest rates might affect an economy’s GDP.
Some argue that increases in investment cause national income to increase. Others argue that the reverse is true: an increase in national income brings about investment.
Discuss whether both these seemingly contradictory statements can be true.
Equilibrium is a key concept in the study of economics. Explain what an equilibrium level of national income means and discuss the relative merits of policies a government might use to cause the equilibrium level to change in an open economy.
‘If investment increases it will cause an increase in output. If output increases it will cause an increase in investment.’
Discuss whether both these statements can be true.
Analyse why the ‘changes in other countries’ may affect the rate of growth of GDP in the US.
Apply the circular flow of income model to the information in Table 1 to discuss why the increase in the US GDP in the first quarter of 2015 was lower than the increase in the last quarter of 2014.
Discuss whether there is any evidence in the information to suggest that the US could have expected a higher rate of growth in GDP in the first quarter of 2015 than that which occurred.
Identify two government policies in the article that could encourage an increase in aggregate demand.
The article states that there has been a ‘marked improvement in the housing market’.
Using the article and your own knowledge, explain how an economy might benefit from an ‘improvement in the housing market’.
The article contrasts a model of an increase in growth through consumer spending with a model of an increase in growth through exports.
Choose two macroeconomic aims of a government and discuss how the two growth models might have different effects on those aims.
Discuss whether the last sentence of the article conflicts with the earlier statements about the need for a government.
Discuss what determines the level of savings in an economy and assess the impact of an increase in the level of savings upon economic growth and employment.