5 Questions | Total Attempts: 73  Settings  This short quiz measures the student's understanding of the basic elements of the Canadian economy through the concept of aggregate demand. Questions relate to the elements of AD and their contribution to the total GDP of Canada.

• 1.
Which of the following variables is NOT part of the aggregate demand (AD) formula?
• A.

C - Consumption

• B.

G - Government spending

• C.

Y - Household income

• D.

X - Exports

• E.

M - Imports

• 2.
Which are the two largest contributors to aggregate demand (AD) in Canada in a typical year?
• A.

C - Consumption

• B.

I - Investment

• C.

G - Government spending

• D.

X - Exports

• E.

M - Imports

• 3.
The marginal propensity to consume (MPC) could be defined as the percentage of incremental income (Y) which Canadians would choose to spend on additional consumption (C), averaged across all Canadians.
• A.

True

• B.

False

• 4.
The aggregate demand multiplier is calculated by the formula:1 / (1 - _)
• 5.
If government spending is increased by \$50B and the MPC is 0.75, what will the total impact on aggregate demand (GDP)?
• A.

\$50B increase

• B.

\$37.5B increase

• C.

\$200B increase

• D.

\$250B increase

• E.

\$37.5B decrease

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