How will higher consumer confidence affect consumer spending?
Greater consumer confidence makes consumers more optimistic about the future (e.g. optimistic about job prospects).
This results in more consumer expenditure.
Price Functions: Explain the Incentive Function of price.
Changes to the price encourage sellers to produce more of the product.
Draw a Keynesian AD/AS diagram to show the effect of Demand-Side fiscal policy and explain the consequences.
→ Real GDP growth to recover from a recession.
→ Higher inflation if already at capacity.
What does the Quantity Theory of Money imply will happen to inflation if we increase the money supply faster than the rate of economic growth? What assumptions does this hold?
Price Levels will increase.
Assuming V is constant.
Define Inflation.
Inflation is a sustained general rise in prices across an economy.
What was Adam’s Smith suggestion for how a government should allocate resources?
Let the people get on with it. By trading, they will sort it out.
Say consumer income increases.
What will happen the demand for a Normal good?
Demand curve shifts right
What is the formula for Price Elasticity of Supply?
Percentage Change Qs / Percentage Change Price
What is opportunity cost?
The benefits foregone of the next best alternative.
What is 'Regulatory Capture'?
When industry regulators are overly-influenced by the industry they are meant to regulate.
e.g. Boeing is too powerful with the FAA, which led to the 737 Max flying even though it was unsafe