Macro definitions

Question 1

Define the accelerator effect

Answer 1

Where planned capital investment is linked positively to the past and expected growth of consumer demand or national income

Question 2

Define Aggregate supply shock

Answer 2

Either an inflation shock or a shock to potential national output, adverse aggregate supply shocks of both types reduce output and can increase the rate of inflation

Question 3

Define animal spirits

Answer 3

The state of confidence or pessimism held by consumers and businesses