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Edexcel A-Level Economics AS 2.3.2 Aggregate Demand Ad Questions

Practise calculating aggregate demand, interpreting AD shifts and analysing how consumption, saving, investment, government spending and net trade change demand.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
AS

Exam points

  • calculate AD or a missing component from C + I + G + (X - M) using table data
  • draw and interpret AD/SRAS shifts from consumption, saving or net-export changes
  • analyse consumption through income, interest rates, confidence, credit and wealth effects
  • define and interpret savings-ratio trends, percentage-point changes and fluctuations
  • explain how saving changes affect consumption, circular-flow withdrawals, AD and the multiplier

Covered syllabus points

2.3.2.1a - concept of AD. characteristics2.3.2.1b - Components of aggregate demand: of AD • C + I + G + (X-M) = • the AD curve2.3.2.1c - distinction between a movement along, and a shift of, the AD curve2.3.2.2a - Influences on consumption: • disposable income • interest rates • consumer confidence •2.3.2.2b - relationship between savings and consumption2.3.2.2c - definition of the 'savings ratio'2.3.2.2d - Causes and effects of changes in the savings ratio2.3.2.3a - distinction between gross investment and net investment2.3.2.3b - Influences on investment: • the rate of economic growth • interest rates • business2.3.2.3c - Government policy to promote investment: • tax relief • subsidies • reductions on the2.3.2.4a - Influences on government expenditure: expenditure (G) • fiscal policy • the level of2.3.2.5a - impact on the net trade balance of changes in: (X-M) • real income • the exchange rate

Question 1

[Maximum number: 4]

The table shows selected macroeconomic data for an economy in 2022.

Table for Question 1 — Edexcel A-Level Economics AS

Ceteris paribus, calculate the value of aggregate demand for this economy in 2022. Show your workings.

Question 2

[Maximum number: 1]

The diagram shows aggregate supply and aggregate demand for an economy. Which one was the most likely cause of the change from AD to AD1?

A

A decrease in government spending

B

An increase in interest rates

C

A decrease in net exports

D

An increase in consumption

Question 3

[Maximum number: 4]

In the first quarter of 2019 average house prices decreased by 15% in real terms in Sydney, Australia.

Explain one possible impact of this change in house prices on the level of consumption.

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