Practice Test 2 Answers 1. The aggregate demand curve illustrates the direct relationship between the interest rate and the quantity of loanable funds demanded. Aggregate demand in an economy is the sum of consumption, investment, government expenditures, and exports. Saving is negative.
Saving is positive.
Saving is zero. Saving is equal to consumption. The simple Keynesian model suggests a counterintuitive understanding of saving. In the Keynesian aggregate expenditure model, an increase in the marginal propensity to consume will cause the expenditure multiplier to fall. When consumption spending exceeds income dissaving occurs.