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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 37

All other things being equal, a rise in the base interest rate of an economy is most likely to reduce its aggregate demand through a rise in the:

A

exchange rate, which increases the price competitiveness of domestic exports.

B

domestic currency price of imported consumption goods.

C

cost of borrowing, which discourages credit-financed consumption and business investment.

D

rate of domestic inflation, which reduces real household incomes.

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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