Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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What is another term for aggregate demand?

Gross Domestic Product
Net Domestic Product
National Income
Disposable Income

The correct answer is: Gross Domestic Product

Aggregate demand refers to the total demand for all goods and services in an economy at a given overall price level and in a given time period. It encompasses the total spending by households, businesses, government, and net exports (exports minus imports). The term "gross domestic product" (GDP) is closely linked to aggregate demand because GDP represents the total monetary value of all finished goods and services produced within a country's borders in a specific time period. Essentially, GDP can be viewed as the sum of aggregate demand at market prices. When analyzing an economy, changes in aggregate demand directly influence GDP, making these terms closely related in economic discussions. The other options, while related to economic measures, do not capture the same meaning as aggregate demand. Net Domestic Product focuses on GDP minus depreciation, National Income measures the total income earned by factors of production in an economy, and Disposable Income refers to the amount of money households have available for spending and saving after taxes. Therefore, these terms represent different aspects of economic performance or household finances rather than total demand in the economy.