Which of the Following Is Characteristic of Aggregate Demand in Canada

question 101

Multiple Choice

Which of the following is characteristic of aggregate demand in Canada?

• A)The exchange-rate effect is relatively small because exports and imports are a small part of real GDP.
• B)The interest-rate effect is relatively small because investment spending is not very responsive to interest rate changes.
• C)The wealth effect is relatively large because money holdings are a significant portion of most households' wealth.
• D)The interest rate effect is relatively large.

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Definitions:

Long-run Equilibrium

A state in economics where all factors of production are fully adjusted to the market condition and all economic agents have no incentive to change their behavior.

Consumer Demand

The desire and willingness of consumers to purchase a certain quantity of goods or services at various price points, at a particular time.

Competitive Increasing-cost Industry

An industry where supply costs increase as output expands, often because resources become scarcer or harder to obtain as production grows.

Long-run Equilibrium

A state in which all firms in a perfectly competitive market earn zero economic profits, with no incentives for new firms to enter or existing firms to exit.