Day: July 30, 2019

The diagram below shows a change in a country’s macro-equilibrium price level and real GDP.

Which of the following might have caused this change?

Select ONE answer:

1. a decrease in business taxes, not matched by a cut in government spending
2. a decrease in raw material costs, not matched by an increase in corporate taxes
3. an increase in exports, not matched by an increase in imports
4. an increase in wages, not matched by an increase in labour productivity

Show your workings to arrive at your answer, and explain and justify your reasons:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple choice question is suitable for Economics KS5 classes.

The answer is 4

1. This would cause an increase in SRAS – a shift to the right of the SRAS curve.
2. This would cause an increase in SRAS – a shift to the right of the SRAS curve.
3. This would cause an increase in AD – a shift to the right of the AD curve.
4. Correct: This would increase costs of production and so cause a shift to the left of the AS curve.

 

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