Equilibrium national output

Extract B (lines 6–7) states: ‘Some analysts hope that, before long, the currency will start to appreciate which could help Norway reduce inflation.’

With the help of a suitable diagram, explain how an appreciation of the krone could help Norway reduce inflation.

Extract E (lines 17–18) states: ‘A low rate of corporation tax has also contributed to both short-run and long-run economic growth.’ With the help of a diagram, explain how a low rate of corporation tax may cause short-run and long-run economic growth.

Explain possible reasons why a country may enter a recession.

Extract C (line 13) states: ‘High economic growth rates allowed Ireland to run a budget surplus in 2018 and 2019.’

With the help of a diagram, explain how high economic growth could help to create a budget surplus.

Extract E (lines 4–5) states: ‘…banks in the UK decreased lending, reducing the availability of credit for households and firms. This damaged the real economy and created high unemployment.’ With the help of a diagram, explain how reduced availability of credit from banks may lead to increased unemployment.

Figure 4 shows the aggregate demand (AD) curve, the short-run aggregate supply (SRAS₁ and SRAS₂) curves and the long-run aggregate supply (LRAS₁ and LRAS₂) curves for an economy.

All other things being equal, which one of the following is most likely to move the economy from point M to point N ?

Extract E (line 14) states: ‘Investment in R&D has been an important driver of economic growth and industrial progress.’

With the help of a diagram, explain how investment in research and development (R&D) can help to increase the long-run growth rate of an economy.

Figure 4 shows two aggregate demand (AD₁ and AD₂) curves and two long-run aggregate supply (LRAS₁ and LRAS₂) curves for an economy.

All other things being equal, which one of the following is the most likely explanation for the movement of the economy from E₁ to E₂?

Figure 10 shows two aggregate demand (AD₁ and AD₂) curves and two short-run aggregate supply (SRAS₁ and SRAS₂) curves for an economy.

All other things being equal, which one of the following is the most likely explanation for the movement of the economy from E₁ to E₂?

Turn over for Section B

Extract C (line 19) states: ‘Improving workers’ productivity is the key to increasing real GDP’.

With the help of a diagram, explain how improving productivity should lead to rising real GDP.

Explain how demand-side and supply-side shocks might increase unemployment in an economy.

Figure 1 shows three aggregate demand (AD) curves, a short-run aggregate supply (SRAS) curve and a long-run aggregate supply (LRAS) curve.

In Figure 1, when

Figure 7 shows two aggregate demand (AD₁ and AD₂) curves and two long-run aggregate supply (LRAS₁ and LRAS₂) curves for an economy.

All other things being equal, which one of the following combinations, A, B, C or D, is most likely to explain the movement of the economy from E₁ to E₂?

An increase in the

Extract E (lines 11–12) states ‘If growth could be increased, the budget deficit would fall much faster.’

With the help of a diagram, explain why a higher rate of economic growth is likely to reduce the budget deficit.

The diagram below shows the aggregate demand (AD) curve, the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. The economy’s initial equilibrium is at E₁.

The government wants to achieve economic growth without conflicting with its long-run objective of price stability. All other things being equal, which one of the following policy combinations is most likely to enable the economy to achieve a new long-run equilibrium

The diagram below shows two aggregate demand (AD) curves and the short-run aggregate supply (SRAS) curve for an economy.

All other things being equal, the change in real national output from Y₁ to Y₂ is most likely to have been caused by an increase in the

The diagram below shows two long-run aggregate supply (LRAS) and two short-run aggregate supply (SRAS) curves for an economy.

All other things being equal, which one of the following is most likely to explain the movement to the right of both the short-run and long-run aggregate supply curves?

Extract B (lines 17–19) states ‘India still protects its economy with anti-dumping measures and export subsidies that are designed to promote economic growth.’

With the help of a diagram, explain how export subsidies may help promote economic growth in India.