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Select all that applyWhich of the following are determinant variables in the concept of aggregate demand and supply?Multiple select question.An economy's real GDPAn economy's net exportsAn economy's price levelAn economy's consumption

Question

Select all that applyWhich of the following are determinant variables in the concept of aggregate demand and supply?Multiple select question.An economy's real GDPAn economy's net exportsAn economy's price levelAn economy's consumption

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Solution

All of the options listed are determinant variables in the concept of aggregate demand and supply.

  1. An economy's real GDP: The Gross Domestic Product (GDP) is a measure of economic activity within a country. It's a total of all goods and services produced over a specific time period within a country's borders. It is a key determinant of both aggregate demand and supply.

  2. An economy's net exports: Net exports (exports minus imports) affect the level of aggregate demand. If a country exports more than it imports, it increases aggregate demand. Conversely, if a country imports more than it exports, it decreases aggregate demand.

  3. An economy's price level: The price level of an economy affects both aggregate demand and supply. If prices are high, people may demand less, and companies may supply more. Conversely, if prices are low, people may demand more, and companies may supply less.

  4. An economy's consumption: Consumption is a major component of aggregate demand. When consumption increases, aggregate demand increases and vice versa.

So, all of the above are determinant variables in the concept of aggregate demand and supply.

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