Chapter 13: aggregate supply & aggregate demand

Question 1

Positive expectations

Answer 1

Businesses expect the future sales and profits to improve due to factors like increased AD.

Question 2

Negative expectations

Answer 2

Businesses expect future sales and profits to fall due to factors like falling AD.

Question 3

Accelerator effect

Answer 3

The relation between the change in new investment and the rate of change in national income.

Question 4

Privatisation

Answer 4

sales of government owned assets to the private sector.

Question 5

Keynesian

Answer 5

The view of John Maynard Keynes, a very influential UK economist (1883-1946) who suggested how governments could cure mass unemployment.

Question 6

Classical view

Answer 6

economists who believed that recessions and slumps would cure themselves.

Question 7

Long-run aggregate supply

Answer 7

the economy’s productive capacity.

Question 8

Natural rate of unemployment

Answer 8

the rate of unemployment that is consistent with astable rate of inflation.

Question 9

Monetary Policy Committee

Answer 9

A committee of economists and central bankers who meet monthly and decide whether or not to change the rate of interest.

Question 10

Supply-side shock

Answer 10

Something that will increase or reduce the costs, hence supply-side of all firms in the economy, e.g. a large increase in the price of oil.