Economics, 3rd Edition

Questions

1 

Why have some governments had 

to adopt austerity policies to cut 

back borrowing and shrink the 

size of the deficit even though 

their economies have been either 

in recession or barely growing?

2 

What is meant by ‘structural 

deficiencies’ in an economy?

3 

In the UK in 2012–2013, employ-

ment rates were rising and infla-

tion remained above target. Using 

an AS/AD diagram which utilizes 

the new Keynesian AS curve, 

explain what you think might be 

happening to the economy as 

aggregate demand rises.

4 

Given your answer to Question 3 

above, how would supply-side 

policies remedy the situation?

5 

Look at the supply-side reforms 

suggested by the New Statesman. 

Explain how these reforms, if 

implemented, would help boost 

the supply-side of the economy?

IN THE NEWS

Reform of planning laws would make it 

easier to redevelop derelict land and would 

be one example of a supply-side policy 

which might help to stimulate the economy.

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