Aggregate demand, supply and policy - Eduqas A-Level Economics (A520) quiz

Consumption, investment, government spending and net exports

Saving, taxation and imports, the three main withdrawals from the flow

Wages, rent, interest and profit, the four rewards to factors of production

Land, labour, capital and enterprise, the economy's factor inputs

A fall in aggregate demand caused by lower household consumption

A rise in the general price level with potential output unchanged

An increase in the economy's productive capacity (potential output)

A movement along the existing aggregate demand curve to a new point

0.8

1.25

5

8

Household saving

Direct taxation

Imported goods

Investment

Raising the central bank's base interest rate to cool demand

Higher government spending and/or lower taxes

Selling government bonds to the public to soak up money

Cutting the money supply to bear down on inflation

The accumulated total of all past borrowing the government still owes

Always larger in value than the outstanding national debt

A tax levied on consumer spending in the economy

The annual gap between government spending and revenue

Reduce aggregate demand and ease demand-pull inflation

Raise both consumption and investment by households and firms

Weaken the exchange rate by reducing foreign demand for the currency

Raise the general price level across the economy

Inflation is running persistently far above the central bank's target rate

Interest rates are already near zero and cannot be cut further

The government budget is comfortably in surplus this year

The exchange rate is fixed against another major currency

Cutting the basic rate of income tax to sharpen work incentives

Privatising a large state-owned industry to boost efficiency

Government investment in education and training

Reducing the power of trade unions in wage bargaining

Shift aggregate demand to the right by boosting total planned spending

Raise the general price level while output stays the same

Increase government borrowing to fund extra public spending

Shift long-run aggregate supply to the right, raising potential output

An inverse (trade-off) relationship between inflation and unemployment

A positive relationship where inflation and unemployment rise together

No relationship at all between inflation and the rate of unemployment

The relationship between economic growth and the current account

There is a permanent and exploitable trade-off between inflation and unemployment

Unemployment returns to the natural rate once inflation expectations adjust

Inflation always settles back to exactly zero in the long run

Supply-side policy has no effect on the level of unemployment