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  • Aggregate demand & supply

Click to read the article below and then answer the questions:

Global savers’ $5.4tn stockpile offers hope for post-Covid spending

  • Explain the relationship between increased saving and decreased confidence on AD.

  • With the help of an AD/SRAS diagram, analyse the impact of “an unleashing of significant pent-up demand” on both inflation and RNO.

  • Why do you think there is a positive relationship between consumer saving and the level of government help during the pandemic?

  • Explain why you think savings have been largely accumulated by richer households and therefore there this has led to higher levels of inequality.

  • If “consumers spend about a third of their excess savings they would boost global output by just over 2 percentage points both this year and next”, should there be government intervention to encourage (force?) consumers to spend their pent up savings? What government intervention should occur?

Tara Watts, The Perse School

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