Economics, 3rd Edition

QUESTIONS FOR REVIEW

1 

What is meant by ‘sustainable economic growth’?

2 

Explain the shape of the new Keynesian AS curve.

3 

What are the two ways in which the output gap can be 

calculated and what is the difference between them?

4 

What is the relevance of the size of the output gap in 

policy making?

5 

Using an AS/AD diagram, show how a rise in AD could 

lead to a rise in national income but with no change in 

the price level.

6 

What are the two main types of supply-side policy and 

what is the difference between them?

7 

Why do supply-siders emphasize the importance of 

marginal tax rates in relation to incentives?