Lesson M1.2.1

M1.2.1 Aggregate demand, its components and shifts Quiz: OCR Economics, Unit 6

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M1.2.1, Aggregate demand, its components and shifts: 20 multiple choice questions for the OCR Economics (H460), Unit 6: Aggregate demand and aggregate supply, written with Revision Ninja.

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The 20 questions

  1. Which formula correctly calculates aggregate demand in an open economy?

    • C + I + S + (X - M)
    • C + I + G + (M - X)
    • C + I + G + M
    • C + I + G + (X - M)

  2. Which component accounts for the largest proportion of aggregate demand in the UK?

    • Investment
    • Net exports
    • Government spending
    • Consumption

  3. What causes a movement along the aggregate demand curve rather than a shift?

    • Higher consumer confidence
    • Tax rate change
    • Increased interest rates
    • Price level change

  4. A country exports £50bn of goods and imports £70bn. What is net exports?

    • -£20bn
    • -£120bn
    • £20bn
    • £120bn

  5. How does a rise in central bank interest rates directly affect aggregate demand?

    • Movement up AD
    • Shifts AD left
    • Shifts AD right
    • Movement down AD

  6. What term describes increased spending caused by a rise in house prices?

    • Accelerator effect
    • Wealth effect
    • Income effect
    • Multiplier effect

  7. What measures the proportion of an increase in disposable income that is spent?

    • Marginal propensity to consume
    • Average propensity to consume
    • Marginal propensity to save
    • Multiplier effect

  8. Which term was used by Keynes to describe business confidence driving investment?

    • Paradox of thrift
    • Moral hazard
    • Animal spirits
    • Creative destruction

  9. Which effect explains why lower price levels increase real purchasing power of savings?

    • Exchange rate effect
    • Multiplier effect
    • Real balance effect
    • Interest rate effect

  10. How does an appreciation of the domestic currency typically affect aggregate demand?

    • Reduces net exports
    • Increases gross investment
    • Increases net exports
    • Reduces government spending

  11. What is calculated by subtracting depreciation from gross investment?

    • Aggregate investment
    • Marginal investment
    • Capital consumption
    • Net investment

  12. Which phase of the trade cycle is characterised by rapid AD growth?

    • Boom
    • Stagnation
    • Trough
    • Recession

  13. Income rises by £100 and spending increases by £80. What is the MPC?

    • 8.0
    • 1.25
    • 0.8
    • 0.2

  14. How does an increase in foreign tariffs on domestic goods affect aggregate demand?

    • Shifts LRAS right
    • Shifts AD left
    • Shifts SRAS left
    • Shifts AD right

  15. An increase in government capital spending on new roads directly increases which component?

    • Net exports
    • Investment
    • Government expenditure
    • Consumption

  16. Why does a higher price level reduce aggregate demand via interest rates?

    • Higher money demand
    • Lower inflation expectations
    • Higher export demand
    • Lower money demand

  17. What is the personal saving ratio measured as a percentage of?

    • Household disposable income
    • Total government expenditure
    • National debt
    • Gross domestic product

  18. Which theory suggests investment depends on the rate of change of national income?

    • Multiplier effect
    • Crowding out effect
    • Accelerator principle
    • Liquidity trap

  19. Which variable is plotted on the vertical axis of an aggregate demand diagram?

    • Real national output
    • General price level
    • Interest rate
    • Tax rate

  20. What direct effect does a reduction in corporation tax have on aggregate demand?

    • Reduces consumer confidence
    • Increases business investment
    • Increases import demand
    • Reduces government spending

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