Macro 6

Question 1

Factors that shift AD

Answer 1

Consumption increase/decrease
Any component of AD increasing/decreasing
Technological advancement

Question 2

Factors that cause SRAS shifts

Answer 2

Costs of labour

Costs of imported goods

Question 3

Recession definition

Answer 3

A period of significant economic decline

Question 4

Policies that can overcome a recession

Answer 4

A trade policy- introduce tariffs
Monetary policy- decrease interest rates to encourage consumption
Fiscal police- lower indirect taxes

Question 5

Policies that can overcome inflation?

Answer 5

Monetary policy- increase interest rates to encourage saving and less consumption to decrease AD
Higher income tax/less government spending

Question 6

Multiplier effect definition

Answer 6

The phenomenon whereby an injection into the circular flow of income ultimately leads to a greater increase in GDP

Question 7

MPC formula

Answer 7

Change In Consumption divided by change in income

Question 8

Multiplier effect formula

Answer 8

1/1-MPC = 1/MPW

Question 9

What is a accelerator effect?

Answer 9

A phenomenon where a injection into a economy can lead to further infections and more income