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2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts

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Question 89

Which one of the following statements concerning household consumption (CCC) and saving (SSS) is correct?

A

An increase in household saving represents an injection into the circular flow of income, directly increasing aggregate demand.

B

Household consumption is the most volatile component of aggregate demand over the business cycle due to the accelerator effect.

C

A decrease in the personal income tax rate increases household disposable income, which increases consumption and shifts the aggregate demand curve to the right.

D

Household consumption is the only component of aggregate demand that does not depend on the level of interest rates in the economy.

Markscheme

2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts Questions

  1. A Level
  2. /Economics
  3. /2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts

222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.

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