Question

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to

purchase at each price level are the:
A) real-balances, interest-rate, and foreign purchases effects.
B) determinants of aggregate supply.
C) determinants of aggregate demand.
D) sole determinants of the equilibrium price level and the equilibrium real output

Answer 1

The correct option is C) determinants of aggregate demand, which include consumption, investment, government spending, and net exports. These factors are influenced by economic events, government policies, and changes in interest rates.

Step-by-step explanation:

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the determinants of aggregate demand. The aggregate demand has four elements: consumption, investment, government spending, and net exports (exports minus imports).

Changes in government spending and tax policies, consumer and business confidence, price levels of key inputs like oil, and technology advancements can all impact aggregate demand. Similarly, interest rates influenced by monetary policy can affect consumption and investment by altering borrowing costs and influencing exchange rates, which impact the foreign purchases effect by making domestic goods more or less expensive relative to foreign goods.