Aggregate Demand and Aggregate Supply analysis — Paper 1 · A Level Economics 9708

26 What is not a possible cause of cost-push inflation? A an increase in firms’ profit margins B an increase in the supply of money C an increase in trade union power D an increase in world oil prices

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2006

26 What would be likely to increase inflation in an economy? A an increase in consumer saving B an increase in interest rates C an increase in labour productivity D an increase in taxes on imports

1 marks

Answer: D

This question in 9708/11 May/June 2007

23 Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worsening falling D worsening rising

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2011

24 In 2008-9 American households reduced their consumption of domestic and imported goods and used part of the money to pay back some of their debts. Which outcome could be consistent with this change? A a decline in the US trade deficit B a decrease in savings C a decrease in the US terms of trade D a decrease in unemployment

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2011

25 A country experienced a significant fall in unemployment but its inflation rate remained low. What could explain this? A Global competition prevented firms passing on higher costs. B Increased spending on imports had lowered the exchange rate. C There was a low level of spare capacity in the economy. D Wage rates had increased by more than labour productivity.

1 marks

Answer: A

This question in 9708/11 May/June 2012

25 A country experienced a significant fall in unemployment but its inflation rate remained low. What could explain this? A Global competition prevented firms passing on higher costs. B Increased spending on imports had lowered the exchange rate. C There was a low level of spare capacity in the economy. D Wage rates had increased by more than labour productivity.

1 marks

Answer: A

This question in 9708/12 May/June 2012

23 The table shows the number of workers and the annual output of an industry. year 1 year 2 year 3 workers in 000s 120 130 100 output in $m 12.00 14.30 13.00 Which statement is correct? A Labour productivity increases in year 2 and in year 3. B Labour productivity increases in year 2 and then declines in year 3. C Labour productivity is at its highest in year 1. D Labour productivity is at its lowest in year 3.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2012

24 The diagram shows the output of an economy. AD AS price level P AD O Y real GDP What would be the effect of a decrease in net exports? aggregate price level real GDP supply A shift decrease unchanged B shift unchanged decrease C unchanged increase unchanged D unchanged unchanged decrease

1 marks

Answer: D

This question in 9708/13 May/June 2013

24 The diagram shows the aggregate demand (AD) and short-run aggregate supply (SRAS) for an economy with a price level OP. SRAS price P level AD O real output Which combination of events would definitely cause a rise in the general price level? world commodity domestic prices unemployment A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2013

24 The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS) in an economy during a year. AS general P1 price level P AD1 AD O Q Q1 real output What explains the rise in the general price level? A boom in consumer spending B higher taxes on company profits C reduction in government-financed projects D rising costs of raw materials

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2013

25 What would increase both demand-pull and cost-push inflation? A an appreciation of a country’s currency B an increase in the cost of borrowing C an increase in the level of its import tariffs D an increase in the price of oil

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2013

23 In the diagram, AD1 is an economy’s initial aggregate demand curve. general price level AD2 AD1 O real output What could cause the curve to shift to AD2? A Businessmen have come to expect a lower rate of return on capital investment. B Domestic consumers have become more thrifty. C Exports have become more competitive in overseas markets. D The economy’s propensity to import has increased.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2013

24 The diagram shows the macroeconomic equilibrium output and price level changing from Y and P to Y1 and P1. AD LRAS AD1 price P level P1 AD AD1 O Y1 Y real output What could have caused this change? A a decrease in exports B a decrease in labour productivity C an increase in the government’s spending D an increase in the money supply

1 marks

Answer: A

This question in 9708/11 May/June 2014

24 The diagram shows an economy’s aggregate demand curve and two short-run aggregate supply curves. SRAS1 SRAS2 price level AD O Y1 Y2 real output What could cause the change in real output from Y1 to Y2? A a decrease in bank lending B a decrease in world oil prices C an increase in indirect taxation D an increase in wage rates

1 marks

Answer: B

This question in 9708/12 May/June 2014

30 A country experiences a significant appreciation in its foreign exchange rate. Which statement correctly describes the most likely combination of effects? A Aggregate demand rises and international competitiveness falls. B Exporters’ profits rise and the terms of trade worsen. C Inflation falls and unemployment rises. D The current account deficit falls and production costs rise.

1 marks

Answer: C

This question in 9708/13 May/June 2014

24 In the diagram AS1 is an economy’s long-run aggregate supply curve. AS1 AS2 general price level O real GDP What will cause the aggregate supply curve to shift from AS1 to AS2? A an increase in consumer spending B an increase in inflation C an increase in net exports D an increase in productivity

1 marks

This question in 9708/11 Oct/Nov 2014

24 The diagram, which shows part of the process that causes the aggregate demand curve to slope downwards to the right, is incomplete. rate of interest … 1 … level of aggregate price consumption level rises … 3 … real value of savings … 2 … Which words correctly complete gaps 1, 2 and 3? 1 2 3 A falls falls falls B falls rises rises C rises falls falls D rises rises falls

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2014

28 Which economic change might contribute to both cost-push and demand-pull inflation? A a fall in the exchange rate B a fall in the interest rate C a rise in the productivity of industrial workers D an improvement in the terms of trade

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

24 People in an economy become more optimistic about the future. This results in an increase in consumer expenditure which shifts the aggregate demand curve to the right, as shown. LRAS SRAS general price P1 level P AD1 AD O Y Y1 real GDP What could cause the economy’s output to return to Y? A a decrease in indirect taxes B a decrease in tariffs on imports C an increase in investment D an increase in wage rates

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2014

27 Why might an increase in a current account surplus cause inflation? A It will decrease aggregate supply. B It will decrease the money supply. C It will increase aggregate demand. D It will increase the exchange rate.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

24 Aggregate demand in an economy may decrease as a result of an increase in A consumption expenditure. B government expenditure. C import expenditure. D investment expenditure.

1 marks

Answer: C

This question in 9708/11 May/June 2015

24 The diagram shows a shift in an economy’s aggregate demand curve from AD1 to AD2. general price level AD2 AD1 O real output What could not be a cause of the shift? A a decrease in income tax B a decrease in the price of goods C an increase in money wage rates D an increase in the money supply

1 marks

Answer: B

This question in 9708/13 May/June 2015

24 The diagram shows an economy’s aggregate demand and aggregate supply curves. AS price level AD O output How are the curves likely to be affected by a natural disaster that destroys a large proportion of an economy’s resources? AD curve AS curve A shift to left shift to left B shift to left shift to right C shift to right shift to left D shift to right shift to right

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2015

24 The diagram shows the original aggregate demand curve, AD1, and the original aggregate supply curve, AS1. What will be the new equilibrium if there is a fall in the country’s exports and an increase in government subsidies to firms? AS3 AS1 A AS2 D X B price level C AD2 AD1 AD3 O real output

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2015

19 A government decided to reduce income tax and increase sales tax. The initial equilibrium point is shown by X on the aggregate demand (AD) and aggregate supply (AS) diagram. What would be the equilibrium point after these tax changes? AS1 AS C AS2 price X B level D A AD2 AD AD1 O real output

1 marks

Answer: C

This question in 9708/12 Feb/March 2016

19 An economy faces rising raw material costs and a fall in business confidence. How will the economy’s real GDP and the price level be affected? real GDP price level A it may rise or fall it will rise B it will fall it may rise or fall C it will fall it will fall D it will rise it may rise or fall

1 marks

Answer: B

This question in 9708/11 May/June 2016

20 The diagram shows an aggregate demand curve (AD). Y AD O X What is measured on the horizontal (X) axis and the vertical (Y) axis? horizontal axis X vertical axis Y A money national output real disposable income B price level real GDP C real GDP price level D real disposable income money national output

1 marks

Answer: C

This question in 9708/11 May/June 2016

19 In 2012, high street shops reported a fall in sales as domestic demand in an economy fell. However, the impact on the overall economy was not as unfavourable as was first feared. What might have lessened the impact on the economy? A Exports increased. B Imports increased. C Savings increased. D Taxes increased.

1 marks

Answer: A

This question in 9708/12 May/June 2016

19 In the diagram AD1 and AD2 are aggregate demand curves for an economy. price level AD1 AD2 O output What could cause an economy’s aggregate demand to shift from AD1 to AD2? A Consumers spend more. B Interest rates rise. C More output is sent abroad as exports. D The government switches expenditure from roads to hospitals.

1 marks

Answer: B

This question in 9708/13 May/June 2016

19 The diagram shows aggregate supply curves and aggregate demand curves for an economy. SRAS1 SRAS2 price X level Y AD2 AD1 O real output What is most likely to cause the equilibrium position to move from X to Y? A a decrease in corporation tax and a decrease in labour productivity B a decrease in interest rates and a decrease in electricity prices C an increase in interest rates and an increase in raw material costs D an increase in marginal tax rates and a decrease in labour productivity

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2016

28 Which government policy will increase aggregate demand? A raising indirect taxation B reducing the budget surplus C removing domestic subsidies D removing import quotas

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2016

19 A government plans to increase spending on education and training every year. Which diagram shows the likely effect of this increase on the economy’s long-run output and price level? A B LRAS1 LRAS1 LRAS2 price price level P2 level P1 P1 P2 AD1 AD2 AD1 O Y1 O Y1 Y2 real output real output C D LRAS1 LRAS2 LRAS2 LRAS1 price price level level P2 P1 P1 P2 AD1 AD2 AD2 AD1 O Y1 Y2 O Y2 Y1 real output real output

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2016

19 The diagram shows the original aggregate demand AD1 and aggregate supply LRAS1 for an economy. LRAS1 LRAS2 price level AD2 AD1 O real GDP What could explain the shifts in aggregate demand to AD2 and aggregate supply to LRAS2? A an increase in government expenditure on health and education B an increase in government expenditure on pensions C an increase in income tax D an increase in interest rates

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2016

19 How does a rise in the price of factors of production affect the aggregate supply (AS) curve? A a move left along the AS curve B a move right along the AS curve C a shift to the left of the AS curve D a shift to the right of the AS curve

1 marks

Answer: C

This question in 9708/12 Feb/March 2017

20 In the diagram, AD1 is an economy’s initial aggregate demand curve. price level AD2 AD1 O output What could cause the curve to shift to AD2? A a decrease in real wages B an appreciation of the currency C an increase in the money supply D an increase in the price level

1 marks

Answer: C

This question in 9708/12 Feb/March 2017

30 The diagram shows four possible aggregate supply curves and an equilibrium point X. A government employs deflationary fiscal policy in order to reduce the rate of inflation in its economy. This shifts aggregate demand to AD2. With which AS curve would this policy be least effective? A B C price D level X AD1 AD2 O national income

1 marks

Answer: D

This question in 9708/12 Feb/March 2017

19 In a closed economy a rise in aggregate demand is needed to increase output in the country. What is necessary to achieve this increase in output in the economy? A enough capacity to produce the extra goods and services demanded B free trade to allow imports to make up any shortages in supply C government spending to be less than tax revenue D reduced credit to lower inflation

1 marks

Answer: A

This question in 9708/11 May/June 2017

20 The diagram shows the long-run aggregate supply (LRAS) curve of an economy. At which equilibrium level of national income is a balance of trade surplus likely to cause the greatest inflationary increase for the economy? price LRAS level O A B C D real national income

1 marks

Answer: D

This question in 9708/11 May/June 2017

19 The diagram shows a shift in the aggregate demand curve of an economy from AD1 to AD2. price level AD2 AD1 O real national income What could have caused this shift? A an increase in expenditure on imports B an increase in government tax rates C an increase in the international trade deficit D an increase in the money supply

1 marks

Answer: D

This question in 9708/12 May/June 2017

28 The government of a country plans to raise income tax rates. The initial equilibrium for the country is represented by point X on the diagram. Which new equilibrium point would an economist predict as the result? price AS1 level A AS2 X B D AD3 C AD1 AD2 O real national income

1 marks

Answer: D

This question in 9708/12 May/June 2017

19 From the initial position of equilibrium shown, there is an increase in government expenditure on goods and services and simultaneously a reduction in the overall efficiency in the production of goods and services. full employment price AS level AD O real output What best describes the likely impact on the economy? equilibrium level equilibrium level of national income of prices A falls uncertain B no change no change C rises rises D uncertain rises

1 marks

Answer: D

This question in 9708/13 May/June 2017

20 What does an aggregate demand curve show? A the level of aggregate demand corresponding to different levels of aggregate supply B the aggregate output demanded corresponding to different average price levels C the equilibrium price level corresponding to different levels of aggregate expenditure D the equilibrium level of income corresponding to different levels of aggregate expenditure

1 marks

Answer: B

This question in 9708/13 May/June 2017

19 In its recent budget a government increased defence expenditure and the amount spent on training to increase the productivity of the workforce. The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply, AS, diagram. What would be the equilibrium point after these changes? AS3 AS1 B price level AS2 X A C D AD3 AD1 AD2 O real output

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2017

28 The government of a country plans to cut income tax rates. The initial equilibrium for the country is represented by point X on the diagram. Which new equilibrium point would an economist predict as the result? AS2 price A AS1 level B D X C AD3 AD1 AD2 O real national income

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2017

19 In its recent budget a government reduced total expenditure while increasing the amount spent on training to increase the productivity of the workforce. The initial equilibrium point is shown by X on the aggregate demand (AD) and aggregate supply (AS) diagram. What would be the equilibrium point after these changes? AS3 AS1 price level C AS2 X B D A AD3 AD1 AD2 O real output

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2017

30 The diagram shows four possible aggregate supply curves and an equilibrium point X. A government employs deflationary fiscal policy in order to reduce the rate of inflation in its economy. This shifts aggregate demand to AD2. With which AS curve would this policy be most effective? A B C price D level X AD1 AD2 O national income

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2017

19 The diagram shows changes in aggregate demand and aggregate supply that have resulted in a move from equilibrium point X to equilibrium point Y. SRAS2 SRAS1 price level Y X AD1 AD2 O real output Which combination of events could have caused this change? A higher interest rates and the discovery of new natural resources B increased consumer confidence and reduced raw material prices C less business confidence and higher indirect taxes D lower exchange rate and net outward migration

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2017

19 An aggregate demand curve slopes downwards from left to right. One reason for this is that a reduction in the average price level will lead to A a decline in the country’s international competitiveness. B an increase in interest rates. C an increase in the real value of money balances. D the expectation of further price falls.

1 marks

Answer: C

This question in 9708/12 Feb/March 2018

20 In the diagram an economy is initially in equilibrium at point X. The government increases spending on education. This coincides with an increase in wage rate inflation. Which point shows the most likely short-run equilibrium of the economy? SRAS2 C SRAS price level D B SRAS1 A X AD1 AD AD2 O real output

1 marks

Answer: C

This question in 9708/12 Feb/March 2018

19 In its 2016 budget statement, the South African government proposed stimulating business activity by the removal of regulations. It also announced that government expenditure was expected to grow by 7.1%. The diagram shows aggregate demand (AD) and aggregate supply (AS) for the South African economy. X is the original equilibrium point. Which new equilibrium would result from the changes? price AS level B A X C D AD O real GDP

1 marks

Answer: C

This question in 9708/11 May/June 2018

19 The diagram shows short-run aggregate supply and demand in an economy, where the initial equilibrium is at S. SRAS3 price level SRAS1 SRAS2 T S AD2 AD1 AD3 O real output What is most likely to cause a movement from S to T? A an increase in consumer expenditure and an increase in productivity B an increase in consumer expenditure and a reduction in imports C an increase in education and training and an increase in income tax D an increase in the exchange rate and a reduction in corporation tax

1 marks

Answer: B

This question in 9708/12 May/June 2018

19 What is both a valid statement and consistent with the features of the diagram? AS price level AD O real output A AS cannot be increased beyond some level of real output. B Consumption is a component of AD and is lower when the general level of prices is lower. C Investment is a component of AS and is independent of the general level of prices. D The greater the demand for a country’s exports, the lower will be AD.

1 marks

Answer: A

This question in 9708/13 May/June 2018

20 The diagram shows an economy’s aggregate supply curve. price AS level O output What is likely to cause the curve to shift to the left? A an increase in investment due to a reduction in interest rates B an increase in the marginal rate of income tax C improvements in technology D schemes to increase the geographical mobility of labour

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2018

19 The diagram shows a shift in the aggregate demand curve, from AD1 to AD2. price level AD2 AD1 O real output What might have caused this shift? A a fall in the budget surplus B a fall in the trade surplus C a rise in imports D a rise in the interest rate

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2018

21 Between June and the end of July 2016 the UK pound sterling depreciated by 11% against a basket of currencies of the UK’s major trading partners. The diagram shows the original aggregate demand curve AD1 and the original aggregate supply curve AS1 for the UK economy before June 2016. The equilibrium is at X. What will be the new equilibrium for the UK economy as a result of the depreciation of the pound sterling? price level AS1 A B X D C AD1 O real output

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2018

19 An economy has an equilibrium level of real output Y, but wishes to move towards its full employment level of real output YFE. price AS level AD O Y YFE real output Which combination of policy measures is most likely to achieve this wish without high inflation? A decreasing interest rates and raising investment in new technology B decreasing the money supply and raising corporation tax rates C increasing interest rates and raising income tax thresholds D increasing the money supply and raising welfare benefit payments

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2018

20 In the diagram, AD1 and AS are an economy’s original aggregate demand and aggregate supply curves. price AS level AD2 AD1 O real output What will cause the aggregate demand curve to shift to AD2? A an appreciation of the currency B an increase in the money supply C an increase in the price level D an increase in the real wage

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2018

23 The diagram shows an aggregate supply curve, and aggregate demand curves. AS price level AD1 AD2 O national income What would cause a decrease in aggregate demand from AD1 to AD2? A an increase in income tax B an increase in the price of electricity C an increase in the tax on goods D an increase in wage rates

1 marks

Answer: A

This question in 9708/12 Feb/March 2019

27 The diagram shows aggregate demand (AD) and aggregate supply (AS) in an economy. The initial equilibrium is at point E. AS1 AS W AS2 price P1 level E P X P2 AD O national output What causes shifts in the aggregate supply curve from AS to AS1 and from AS to AS2? shift from AS to AS1 shift from AS to AS2 A change in AD from E to W change in AD from E to X B increase in price level from P to P1 decrease in price level from P to P2 C increase in productivity of capital fall in the returns to capital D shortages of skilled labour improvements in training of workforce

1 marks

Answer: D

This question in 9708/12 Feb/March 2019

19 The diagram shows aggregate demand and aggregate supply curves for an economy. general AS price level AD AD1 O national output What would cause a change in the aggregate demand from AD to AD1? A a decrease in the budget surplus B consumption of domestic instead of foreign goods C government campaigns to encourage household savings D investment in knowledge-based enterprises

1 marks

Answer: C

This question in 9708/11 May/June 2019

20 What would cause a shift in the short-run aggregate supply curve but not the long-run aggregate supply curve? A advances in technology B a change in the money wage rate C emigration of people of working age D gross investment exceeding depreciation

1 marks

Answer: B

This question in 9708/11 May/June 2019

24 The diagram shows aggregate supply and aggregate demand curves for an economy. general SRAS1 price level SRAS2 X Y AD2 AD1 O real output What would cause a movement from X to Y? A a decrease in income tax and in the cost of production B a decrease in interest rates and increase in the cost of production C an increase in income tax and in the cost of production D an increase in interest rates and decrease in the cost of production

1 marks

Answer: A

This question in 9708/11 May/June 2019

20 How can a change in consumption that increases unemployment be illustrated on an aggregate demand and aggregate supply diagram? effect on the aggregate demand curve effect on the aggregate supply curve A movement down the demand curve shift outwards B movement up the demand curve shift inwards C shift inwards movement down the supply curve D shift inwards movement up the supply curve

1 marks

Answer: C

This question in 9708/12 May/June 2019

23 What is assumed to be constant when drawing an aggregate demand curve? A government tax revenue B interest rates C the level of unemployment D the money supply

1 marks

Answer: D

This question in 9708/12 May/June 2019

29 An economy is currently in the position PY shown on the diagram. SRAS price level P AD O Y real GDP Which short-run effects is government spending on education likely to have on unemployment and inflation? unemployment inflation A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: B

This question in 9708/12 May/June 2019

18 The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS) in an economy during a year. AS general price level P1 P AD1 AD O Q Q1 real output What explains the rise in the general price level? A boom in consumer spending B higher taxes on company profits C reduction in government-financed projects D rising costs of raw materials

1 marks

Answer: A

This question in 9708/13 May/June 2019

22 Australia’s aggregate demand decreased over the last year. What might have been the cause of this? A a reduction in consumer saving B a reduction in direct taxes C a reduction in imports D a reduction in investment

1 marks

Answer: D

This question in 9708/13 May/June 2019

27 An increase in what will shift the aggregate demand curve in an economy to the right? A budget deficit B consumer savings C general price level D interest rate

1 marks

Answer: A

This question in 9708/13 May/June 2019

20 How will an increase in government spending on infrastructure affect aggregate demand and aggregate supply? aggregate demand aggregate supply A decreases increases B increases decreases C increases increases D stays the same increases

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2019

24 The diagrams show a country’s aggregate demand (AD1) and aggregate supply (AS1) curves. Since the world economic downturn (2007–2008) some governments have reduced labour costs and ensured interest rates remained unchanged. How would this most likely be shown on a diagram? A B AS1 AS1 price price AS2 level level P1 P1 P2 P2 AD1 AD1 AD2 O real GDP O real GDP C D AS2 AS1 price price AS1 level level P2 P2 P1 P1 AD1 AD2 AD1 O real GDP O real GDP

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2019

30 Which change in economic circumstances is most likely to lead to a reduction in the rate of domestic inflation in an economy? A a depreciation in the currency B a reduction in the productivity of labour C a world-wide recession D an increase in direct taxes to finance increased welfare payments

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2019

20 The diagram shows the original aggregate demand curve, AD1, and original aggregate supply curve, AS1. The original equilibrium is at X. AS2 price AS1 level Y P2 P1 X AD1 O Y2 Y1 real GDP What would cause the new equilibrium to be at Y? A an increase in export prices B an increase in government spending on education C an increase in import prices D an increase in the money supply

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2019

24 In February 2016 the Organisation for Economic Cooperation and Development (OECD) urged major economies such as the US and Japan to increase government spending. How would this affect the aggregate demand (AD) curve in these countries? A a move left along the AD curve B a move right along the AD curve C a move to the left of the AD curve D a move to the right of the AD curve

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2019

20 The diagram shows the original aggregate demand curve, AD1, and the original aggregate supply curve, AS1. The original equilibrium is at X. What would be the new equilibrium if there is an increase in private sector investment and an increase in government spending on training courses? price AS2 level AS1 A AS3 D X B C AD1 AD2 AD3 O real GDP

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2019

29 A government reduces the rate of tax firms are charged on their land and buildings. How is this likely to affect the economy’s price level and real output? price level real output A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2019

23 A central bank forecasts a rise in raw material costs. The government plans to increase spending on health and education. The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply, AS, diagram. What would be the new equilibrium point in the short run if the forecasts prove to be accurate and the government plans are implemented? AS1 general AS2 AS price C level D X B A AD AD2 AD1 O real output

1 marks

Answer: C

This question in 9708/12 Feb/March 2020

27 In a closed economy a rise in aggregate demand is needed to increase output in the country. What is necessary to achieve this increase in output in the economy? A enough capacity to produce the extra goods and services demanded B free trade to allow imports to make up any shortages in supply C government spending to be less than tax revenue D reduced credit to lower inflation

1 marks

Answer: A

This question in 9708/12 Feb/March 2020

20 The diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for an economy. general AS price level AD2 AD1 O real output Which situation would not cause a shift from AD1 to AD2? A a fall in the general price level as government spending is reduced B an easing of credit by commercial banks for household purchases of consumer goods C an increase in earnings from exports of high-tech products D an increase in investment by firms in computer systems

1 marks

Answer: A

This question in 9708/11 May/June 2020

21 Which combination of changes is most likely to lead to an increase in the aggregate price level and the level of real output? income tax rate net exports A fall decrease B fall increase C rise decrease D rise increase

1 marks

Answer: B

This question in 9708/11 May/June 2020

26 The diagram shows the aggregate demand (AD) and aggregate supply (AS) for an economy. AS2 general price AS1 level AD O real output Which changes in subsidies and indirect taxes would have caused the change in AS shown? A higher subsidies and higher indirect taxes B higher subsidies and lower indirect taxes C lower subsidies and higher indirect taxes D lower subsidies and lower indirect taxes

1 marks

Answer: C

This question in 9708/11 May/June 2020

27 In its recent budget a government increased defence expenditure and also the amount spent on training that increased the productivity of the workforce. The initial equilibrium point is shown by X on the aggregate demand (AD) and aggregate supply (AS) diagram. What would be the equilibrium point after these changes? AS3 AS1 general B price level AS2 X A C D AD3 AD1 AD2 O real output

1 marks

Answer: C

This question in 9708/11 May/June 2020

29 In 2018 the United States (US) government reduced direct taxes on consumers and businesses. What are likely to be the effects of these changes on consumption, investment and national output? consumption investment national output A decrease decrease decrease B decrease increase increase C increase decrease decrease D increase increase increase

1 marks

Answer: D

This question in 9708/11 May/June 2020

19 What is likely to cause a decrease in aggregate demand? A an appreciation in the exchange rate B an improvement in consumer confidence C an increase in government expenditure D an increase in the money supply

1 marks

Answer: A

This question in 9708/12 May/June 2020

30 During the Great Depression the US government believed that deflation was caused by a collapse in the prices of stock and other assets, reducing the levels of wealth and confidence. The diagrams show two approaches to counter deflation. diagram Y diagram Z price price level AS1 level AS2 P2 AS1 P1 P2 P1 AD2 AD1 AD1 O Y1 Y2 O Y2 Y1 real GDP real GDP Given this belief, which policy should the US government have used, in an attempt to remove the deflation and which diagram represents the intended outcome of the policy? policy intended outcome A decrease interest rates diagram Y B reduce corporation tax diagram Z C increase interest rates diagram Z D reduce corporation tax diagram Y

1 marks

Answer: A

This question in 9708/12 May/June 2020

21 What will increase if aggregate demand rises when aggregate supply is perfectly elastic? A labour shortages B real output C the price level D wage rates

1 marks

Answer: B

This question in 9708/13 May/June 2020

28 What would be a positive effect on the growth of an economy in the short run, if the government reduced a direct tax on individual earnings? A food prices would increase due to shortages B imports of luxury cars would increase to satisfy a change in demand C savings would increase due to additional disposable income D the consumption of domestically produced goods would increase

1 marks

Answer: D

This question in 9708/13 May/June 2020

21 An economy is represented by the AD / AS diagram, which is initially in macroeconomic equilibrium. AS price level AD O real output Which change will definitely result in a rise in real output? A a fall in personal taxation and a fall in government expenditure B a rise in consumption and a rise in the cost of raw materials C a rise in export revenues and a fall in import expenditure D a rise in government expenditure and a fall in investment

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2020

25 The diagram shows aggregate demand curves AD1 and AD2 and an aggregate supply curve AS1. AS1 price level AD2 AD1 O real output What could cause the shift in the aggregate demand curve from AD1 to AD2? A a rise in the interest rates B a rise in output per worker C a rise in the budget deficit D a rise in the value of the exchange rate

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2020

30 What represents the total of aggregate demand in a closed economy? A C + I + G B C + I + G + X C C + I + G + (X – M) D C – (S + T)

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2020

19 Under which circumstance would the rate of inflation be most likely to fall? A Government spending increases and society’s marginal propensity to save falls. B Reduced interest rates result in consumers increasing their spending. C The government increases direct taxes and the level of investment falls. D The prices of imported raw materials rise, whilst demand for exports falls.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2020

21 The diagram shows an economy with an initial equilibrium real output of Y1 at a price level of P1. price AS1 AS2 level P1 AD1 AD2 O Y1 Y2 real output Which combination of events is likely to cause the equilibrium real output to rise to Y2? A an increased budget deficit and a fall in energy costs B an increased budget surplus and a rise in energy costs C an increased trade deficit and a fall in indirect tax D an increased trade surplus and a rise in indirect tax

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2020

19 What will cause a movement along an aggregate supply curve? A a rise in the demand for exports B a rise in the price of raw materials C a rise in the productivity of labour D a rise in the rate of sales tax

1 marks

Answer: A

This question in 9708/12 May/June 2021

19 A government plans to increase spending on education and training every year. Which diagram shows the likely effect of this increase on the economy’s long-run output and price level? A B LRAS1 LRAS1 LRAS2 price price level level P2 P1 P1 P2 AD1 AD2 AD1 O Y1 O Y1 Y2 real output real output C D LRAS1 LRAS2 LRAS2 LRAS1 price price level level P2 P1 P1 P2 AD1 AD2 AD2 AD1 O Y1 Y2 O Y2 Y1 real output real output

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2021

23 The diagram shows aggregate demand (AD) and aggregate supply (AS) for an economy. AS1 AS2 price level P1 P2 AD O Y1 Y2 real output What is most likely to cause the shift from AS1 to AS2? A a decrease in the exchange rate B a decrease in the price level C a fall in immigration D a fall in the average level of wages

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2021

30 What are the components of aggregate demand? A consumption + investment + government spending + (exports – imports) B consumption + investment + taxation – (exports – imports) C consumption + saving + taxation – (exports – imports) D consumption + saving + taxation + (exports – imports)

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2021

22 From the initial position of equilibrium shown, there is an increase in government expenditure on goods and services and simultaneously an increase in the costs of production of goods and services. full employment price AS level AD O real output What best describes the likely impact on the economy? equilibrium level equilibrium level of national income of prices A falls uncertain B no change no change C rises rises D uncertain rises

1 marks

Answer: D

This question in 9708/12 Feb/March 2022

23 The diagram shows a shift in an economy’s aggregate demand curve from AD1 to AD2. general price level AD2 AD1 O real output What could not be a cause of the shift? A a decrease in income tax B a decrease in the price of goods C an increase in money wage rates D an increase in the money supply

1 marks

Answer: B

This question in 9708/12 Feb/March 2022

22 The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in equilibrium at X. In this economy, a severe shortage of raw materials causes a large rise in their price. The effect of this change is shown by a move to which point? AD3 AS2 AD1 general AD2 AS1 price level C B D A X O real national income

1 marks

Answer: B

This question in 9708/11 May/June 2022

19 In 2020, shops reported a fall in sales as domestic demand in an economy fell. However, the impact on the overall economy was not as unfavourable as was first feared. What might have lessened the impact on the economy? A Exports increased. B Imports increased. C Savings increased. D Taxes increased.

1 marks

Answer: A

This question in 9708/12 May/June 2022

27 The diagram shows a shift in a country’s short-run aggregate supply curve from SRAS1 to SRAS2. The country imports oil. price SRAS2 level SRAS1 O real output Why might an increase in the world price of oil have caused this shift? A A rise in inflation is expected. B Consumers face a fall in their disposable income. C Domestic firms’ costs have increased. D The government reduces tax on oil and petroleum products.

1 marks

Answer: C

This question in 9708/12 May/June 2022

19 The diagram shows an aggregate demand (AD) curve. Y AD O X What is measured on the horizontal (X) axis and the vertical (Y) axis? horizontal axis X vertical axis Y A money national output real disposable income B price level real GDP C real GDP price level D real disposable income money national output

1 marks

Answer: C

This question in 9708/13 May/June 2022

21 What is a correct description of an aggregate demand (AD) curve? A It is a curve obtained by adding the market demand curves of all consumer goods traded in an economy. B It is a curve determined by the horizontal summation of all individual consumer demand curves for a product. C It is a curve that shows the total amount of goods and services firms are willing to buy at a given price in an economy. D It is a curve that shows the total demand of all goods and services produced at all price levels in an economy.

1 marks

Answer: D

This question in 9708/13 May/June 2022

26 The diagram shows the aggregate demand (AD) and aggregate supply (AS) for a country. The initial equilibrium is at point E. The sum of the price elasticities of demand for imports and exports for this country exceeds one. A devaluation of the country’s exchange rate will cause aggregate demand to change. What will be the new equilibrium? AS price level A B E D C AD O real output

1 marks

Answer: B

This question in 9708/13 May/June 2022

29 The diagram shows the AD / AS curves for an economy. AS1 price level AS2 X Y AD2 AD1 O real GDP Which government action is most likely to cause the equilibrium position to move from X to Y? A an increase in the exchange rate that makes locally produced goods less price-competitive, both at home and abroad B an increase in government spending on infrastructure that increases the production potential of the economy C an increase in interest rates that increases the cost of borrowing D an increase in real wages of labour

1 marks

Answer: B

This question in 9708/13 May/June 2022

24 The diagram shows an aggregate demand (AD) and an aggregate supply (AS) curve. AS price level AD O national output There is a sustained rise in the prices of imported raw materials on which the economy depends. Assuming AD remains independent of AS, what are the most likely effects on the economy? AS price level A decreases falls B increases falls C decreases rises D increases rises

1 marks

Answer: C

This question in 9708/14 May/June 2022

19 Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull inflation and on cost-push inflation in an oil-importing country of an increase in the world price of oil? effect on demand-pull effect on cost-push inflation inflation A increase increase B increase reduce C reduce increase D reduce reduce

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2022

22 The diagrams show initial equilibrium positions at Y1P1. Which diagram reflects the impact on an economy of higher unit wage costs and an improvement in the balance of trade? A B SRAS2 SRAS2 price price level level SRAS1 P2 SRAS1 P2 P1 AD1 AD2 P1 AD AD2 AD2 AD AD2 AD1 O Y2 Y1 O Y2 Y1 real real GDP GDP C D SRAS1 SRAS1 price price SRAS2 level level P1 SRAS2 P1 P2 AD2 AD1 P2 AD1 AD AD2 AD AD2 AD2 O Y1 Y2 O Y1 Y2 real real GDP GDP

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2022

20 An increase in what will shift the aggregate demand curve in an economy to the right? A budget deficit B consumer savings C general price level D interest rate

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2022

30 The diagram shows four possible aggregate supply curves and an equilibrium point X. A government employs deflationary fiscal policy in order to reduce the rate of inflation in its economy. This shifts aggregate demand to AD2. With which AS curve would this policy be most effective? A B C price D level X AD1 AD2 O national income

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2022

21 An economy is initially in equilibrium. Which combination of events will definitely cause an increase in the general price level of the economy and a decrease in its real output? aggregate short-run demand aggregate supply A decreases decreases B decreases unchanged C increases decreases D unchanged decreases

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2022

22 The government of a country changes from a balanced budget to a budget deficit. From which point along the country’s long-run aggregate supply curve (LRAS) will this change cause the largest increase in employment without creating inflationary pressure? LRAS price level D C A B O real output

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2022

24 What is a certain outcome on an aggregate demand and aggregate supply diagram of an increase in factor productivity? A downward shift of the aggregate demand curve B downward shift of the aggregate supply curve C an upward shift of the aggregate demand curve D an upward shift of the aggregate supply curve

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2022

21 The diagram shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves for a country. X is the original equilibrium position. In one year, over one million foreign workers left the country and at the same time the country’s currency appreciated against the currencies of its major trading partners. What will be the most likely new equilibrium position for this country? LRAS3 LRAS1 LRAS2 general D price level A X AD2 C AD1 B AD3 O real ouput

1 marks

Answer: C

This question in 9708/12 Feb/March 2023

18 Which statement explains why the aggregate demand curve is downward sloping? A As prices fall, the demand for exports becomes more elastic. B As prices fall, fewer goods are imported. C As prices fall, the rate of interest will rise. D As prices fall, real wealth rises and so spending increases.

1 marks

Answer: D

This question in 9708/11 May/June 2023

19 The diagram shows the aggregate demand (AD) and aggregate supply (AS) for an economy. AS2 general price AS1 level AD O real output Which changes in subsidies and indirect taxes would have caused the change from AS1 to AS2? A higher subsidies and higher indirect taxes B higher subsidies and lower indirect taxes C lower subsidies and higher indirect taxes D lower subsidies and lower indirect taxes

1 marks

Answer: C

This question in 9708/11 May/June 2023

21 In the diagram, the intersection of AD and LRAS at point X represents the current macroeconomic equilibrium. Which point could represent the new equilibrium after the introduction of an increase in the retirement age? LRAS2 LRAS LRAS1 general price level B C D X AD1 A AD AD2 O real GDP

1 marks

Answer: C

This question in 9708/11 May/June 2023

29 A country experiences a fall in the value of exports and an increase in the value of imports of goods and services. What are the effects of these changes? balance of aggregate payments on demand goods and services A fall improve B fall worsen C rise improve D rise worsen

1 marks

Answer: B

This question in 9708/11 May/June 2023

18 Which change is shown directly by the use of aggregate demand and aggregate supply analysis? A the nominal income level B the price level C the unemployment level D the wage level

1 marks

Answer: B

This question in 9708/12 May/June 2023

19 Why might aggregate demand increase when a country’s price level falls? A Domestic interest rates will tend to fall. B Imports become more price competitive. C Real incomes fall. D The purchasing power of savings falls.

1 marks

Answer: A

This question in 9708/12 May/June 2023

27 The diagram shows the current equilibrium of an economy. The government introduces a contractionary monetary policy. AS price level AD O output What is the most likely outcome? A a fall in investment and a fall in inflation B a fall in investment and a rise in inflation C a rise in investment and a fall in inflation D a rise in investment and a rise in inflation

1 marks

Answer: A

This question in 9708/12 May/June 2023

25 What is the most likely cause of an outward shift of a country’s aggregate demand curve? A a decrease in the competitiveness of domestically produced products B a decrease in the general price level C a decrease in the money supply D a depreciation of the country’s exchange rate

1 marks

Answer: D

This question in 9708/13 May/June 2023

26 The diagram shows the macroeconomic equilibrium output and price level changing from Y and P to Y1 and P1. LRAS price level P P1 AD AD1 O Y1 Y real output What could have caused this change? A a decrease in exports B a decrease in labour productivity C an increase in the government’s spending D an increase in the money supply

1 marks

Answer: A

This question in 9708/13 May/June 2023

28 The diagram shows aggregate demand (AD) and aggregate supply in the short run (SRAS) and the long run (LRAS). LRAS LRAS1 price level W SRAS SRAS1 Y AD O real GDP Which row is correct in causing a shift in the short run aggregate supply from SRAS to SRAS1 and the long run aggregate supply from LRAS to LRAS1? shift from SRAS to SRAS1 shift from LRAS to LRAS1 A change in AD from W to Y increase in population B decrease in raw material costs improvements in the education of workers C decrease in wage rates decrease in immigration D increase in availability of labour increase in labour productivity

1 marks

Answer: B

This question in 9708/13 May/June 2023

16 A government has increased output with no effect on the price level. AS price level AD1 AD2 AD3 AD4 O output What must have been the initial level of aggregate demand (AD)? A AD1 B AD2 C AD3 D AD4

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2023

21 Why is increased government provision of education most likely to shift the aggregate demand curve to the right? A It will increase aggregate supply. B More schools will be built. C The government will have to raise taxes. D Workers will be more highly skilled.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2023

28 The government of a country plans to raise income tax rates. The initial equilibrium for the country is represented by point X on the diagram. Which new equilibrium point would an economist predict as the result? price AS1 level A AS2 X B D AD3 C AD1 AD2 O real national income

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2023

24 A government increases the rate of income tax. What is the effect, in the short run, on the aggregate demand curve or the aggregate supply curve? A The aggregate demand curve shifts left. B The aggregate demand curve shifts right. C The aggregate supply curve shifts left. D The aggregate supply curve shifts right.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2023

29 A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country’s aggregate demand (AD) curve. AS price level AD4 AD3 AD2 AD1 O real GDP Which starting position for the aggregate demand curve would make this policy least effective? A AD1 B AD2 C AD3 D AD4

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2023

30 A government reduces the rate of tax firms are charged on their land and buildings. How is this likely to affect the economy’s price level and real output? price level real output A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2023

20 An aggregate demand curve slopes downwards from left to right. One reason for this is that a reduction in the average price level will lead to A a decline in the country’s international competitiveness. B an increase in interest rates. C an increase in the real value of money balances. D the expectation of further price falls.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2023

26 The diagram shows the long-run aggregate supply (LRAS) and aggregate demand (AD) curves for an economy. LRAS price level Y X AD O real output The initial equilibrium is at point X. Which combination of monetary policies will shift the equilibrium position to point Y? money rate of supply interest A increase increase B decrease increase C increase decrease D decrease decrease

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2023

28 Which combination of initial equilibrium and supply-side policy is likely to be least effective when attempting to increase the real output of an economy? initial equilibrium real output supply-side policy measure A below full employment abolition of national minimum wage B below full employment extra spending on training C full employment extra investment in infrastructure D full employment reduction in the rate of income tax

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2023

16 What is least likely to cause a simultaneous increase in demand-pull and cost-push inflation? A depreciation of currency B increased import tariffs C decreased spending on infrastructure D increased wages

1 marks

Answer: C

This question in 9708/12 Feb/March 2024

19 Aggregate demand in an economy may decrease as a result of an increase in A consumption expenditure. B government expenditure. C import expenditure. D investment expenditure.

1 marks

Answer: C

This question in 9708/12 Feb/March 2024

22 The diagram shows aggregate demand (AD) curves for an economy. price level AD1 AD2 O real output Which combination is most likely to have caused the shift from AD1 to AD2? income tax sales tax A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9708/12 Feb/March 2024

15 The table illustrates macroeconomic data for an economy. All figures are in $ billions. What is the equilibrium real output? consumption government investment exports imports real output expenditure expenditure A 110 100 50 10 20 100 B 120 100 60 20 30 200 C 140 100 70 30 40 300 D 160 100 80 40 50 430

1 marks

Answer: C

This question in 9708/11 May/June 2024

18 A major trading nation, country X, is in equilibrium at the full employment level of real output. There is then a recession in its main international markets. What are the most likely consequences of this change for country X? rate of inflation unemployment A decrease decrease B decrease increase C unchanged decrease D unchanged increase

1 marks

Answer: B

This question in 9708/11 May/June 2024

19 Why would a fall in a country's average price level cause its aggregate demand curve to slope downwards? A It leads to an increase in interest rates. B It reduces the real value of money balances. C It makes the country’s goods cheaper relative to foreign goods. D It leads to the expectation of further price falls.

1 marks

Answer: C

This question in 9708/11 May/June 2024

15 Which government policy will increase aggregate demand? A raising indirect taxation B reducing the budget surplus C removing domestic subsidies D removing import quotas

1 marks

Answer: B

This question in 9708/12 May/June 2024

17 What causes a rise in cost-push inflation? A a fall in the rate of income tax B a rise in the rate of income tax C a depreciation of the exchange rate D an appreciation of the exchange rate

1 marks

Answer: C

This question in 9708/12 May/June 2024

18 Which change affecting an economy’s labour force will cause an increase in economic growth in the short run? A an increase in students entering university B an increase in the birth rate C an increase in the immigration of skilled labour D an increase in the school leaving age

1 marks

Answer: C

This question in 9708/12 May/June 2024

21 The original equilibrium in the economy is represented by point X, the intersection of AD1 and AS1, on the AD / AS diagram shown. The government decreases the money supply. What is the new equilibrium point? price level AS2 AS1 AS3 A B X Pe D C AD2 AD1 AD3 O Ye national income

1 marks

Answer: D

This question in 9708/12 May/June 2024

7 A company uses large amounts of gas to produce steel. Supplies of gas are reduced at the same time as the market for steel is hit by a recession. What can be said about the likely changes in the market for steel? equilibrium equilibrium price quantity A falls uncertain B rises uncertain C uncertain falls D uncertain rises

1 marks

Answer: C

This question in 9708/13 May/June 2024

15 The diagrams show a country’s aggregate demand (AD1) and aggregate supply (AS1) curves. Since the world economic downturn (2007–2008), some governments have reduced labour costs and ensured interest rates remained unchanged. How would this most likely be shown on a diagram? A B AS1 AS1 price price AS2 level level P1 P1 P2 P2 AD1 AD1 AD2 O real GDP O real GDP C D AS2 AS1 price price AS1 level level P2 P2 P1 P1 AD1 AD2 AD1 O real GDP O real GDP

1 marks

Answer: A

This question in 9708/13 May/June 2024

16 The diagram shows the effect on the average price level when aggregate demand (AD) increases from AD1 to AD2. average LRAS price level P2 P1 AD2 AD1 O real GDP Which statement relating to this change in aggregate demand is correct? A Nominal GDP has increased. B Nominal GDP is unchanged. C Real GDP has increased. D Real GDP has fallen.

1 marks

Answer: A

This question in 9708/13 May/June 2024

16 What is most likely to cause the price level to rise? An increase in A productivity of labour. B raw material prices. C income taxes. D subsidies paid to producers.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2024

19 Which combination correctly identifies the necessary information to construct an accurately labelled graph of a normal short-run aggregate supply curve (SRAS)? gradient of the horizontal x-axis vertical y-axis SRAS curve A negative quantity price level B positive real output price level C positive real output price D positive price level real output

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2024

20 A government makes two changes to income tax. 1 The individual tax-free income allowance is increased. 2 The marginal rate of income tax is decreased. How will these changes affect aggregate demand and aggregate supply in the economy? aggregate aggregate demand supply A decrease increase B decrease unchanged C increase increase D increase unchanged

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2024

23 The central bank of a country raises interest rates to reduce the general price level. When is this policy likely to have the biggest impact? position of the economy responsiveness of on its production possibility aggregate demand to curve (PPC) diagram interest rate changes A below the PPC high B below the PPC low C on the PPC high D on the PPC low

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2024

17 What is likely to move an economy’s aggregate demand curve to the right? A a fall in income equality B a fall in incomes abroad C a fall in the exchange rate D a fall in the government budget deficit

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2024

22 An economy is in equilibrium at point E on the diagram. The government reduces its expenditure on defence. Which point on the diagram shows the new equilibrium? AS1 AS2 price level P1 E A B P2 C P3 D AD1 P4 AD2 AD3 O Y1 Y2 Y3 national income

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2024

19 A government is considering building a large hospital. The impact on the country’s price level will depend partly on the amount of expensive raw materials the country imports for the hospital and the level of unemployment in the country. Which combination of imports of materials for the hospital and the level of unemployment is most likely to lead to the largest rise in the price level? imports of unemployment materials A high high B high low C low high D low low

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2024

18 The diagram shows aggregate demand (AD) and long-run aggregate supply (LRAS) with X as the initial equilibrium. LRAS LRAS1 price level F G X H AD1 J AD AD2 O real GDP Which combination of policy and new final equilibrium point is correct? new final policy equilibrium point A increased direct taxation F B increased government G spending on infrastructure C appreciation of the H exchange rates D decreased interest rates J

1 marks

Answer: B

This question in 9708/12 Feb/March 2025

24 A government decides to use supply-side policy to increase long-run aggregate supply (LRAS). What is the most likely reason why this policy tool will not lead to a fall in the price level? A Aggregate demand will also increase. B Labour productivity levels will increase. C Workers will save any extra wages they earn. D Workers will spend any extra wages on imports.

1 marks

Answer: A

This question in 9708/12 Feb/March 2025

19 Which statement is not correct? A The long-run aggregate supply curve can be downward sloping. B The long-run aggregate supply curve can be horizontal. C The long-run aggregate supply curve can be upward sloping. D The long-run aggregate supply curve can be vertical.

1 marks

Answer: A

This question in 9708/11 May/June 2025

23 A government uses expansionary monetary policy over a three-year period. Which combination identifies the likely impact of such a policy? real GDP price level unemployment A falling rising falling B rising rising rising C rising rising falling D rising falling rising

1 marks

Answer: C

This question in 9708/11 May/June 2025

18 The aggregate demand curve is typically downward sloping. What is one possible explanation for this? A A fall in the price level will lead to a rise in demand for imports. B As the price level falls, improved productivity will reduce unit costs. C If the price level is high, any interest rate changes will encourage consumption. D The real value of assets increases as the price level falls.

1 marks

Answer: D

This question in 9708/12 May/June 2025

25 The diagram shows aggregate demand (AD) and aggregate supply (AS) curves. The initial equilibrium is at X. A government decides to invest in an increase in infrastructure. What will be the short-term effect of this policy on the equilibrium? AD AD1 price level A AS1 B AS X C AS2 D O real GDP

1 marks

Answer: B

This question in 9708/12 May/June 2025

18 The diagram shows aggregate demand (AD) and aggregate supply (AS) where the initial equilibrium is at point X. The central bank forecasts a rise in raw material costs. The government plans to increase spending on health. What would be the new equilibrium in the short run if the forecasts prove to be accurate and the government plans are implemented? AS1 general AS2 C AS price level D X B A AD AD2 AD1 O real output

1 marks

Answer: C

This question in 9708/13 May/June 2025

19 What is an example of fiscal policy aimed at increasing aggregate demand in an economy? A increasing expenditure by firms on skills training programmes for unskilled workers B increasing the commercial banks’ lending ability C reducing the rate of income tax for all income earners D reducing the rate of interest on loans to manufacturing companies

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2025

20 The aggregate demand (AD) curve in an economy shifts to the left. What is most likely to cause this shift? A a decrease in the exchange rate B a decrease in the interest rate C an increase in the budget deficit D an increase in the current account deficit

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2025

21 The diagram shows the AD and AS curves for a low income country. Oil and gas make up 90% of its exports. The initial equilibrium level of national income is Y1. What is the most likely new equilibrium point if the worldwide prices of oil and gas rise dramatically? AS general price level A B D C AD O Y1 national income

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2025

16 The diagram shows the AD and AS curves for a country. The equilibrium level of national income is Y1 and the general price level is P1. AS general price level P1 AD O Y1 national income What is the most likely effect on employment and the general price level of a small decrease in government expenditure? employment general price level A falls falls B falls unchanged C unchanged falls D unchanged unchanged

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2025

17 The diagram shows aggregate demand and aggregate supply curves for an economy. general AS price level AD AD1 O national output What would cause a change in the aggregate demand from AD to AD1? A government campaigns to encourage household savings B consumption of domestic instead of foreign goods C a decrease in the budget surplus D investment in knowledge-based enterprises

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2025

22 What is the effect of an increase in the money supply on the interest rate and the aggregate demand (AD) curve? interest rate AD curve A falls shifts left B rises shifts left C falls shifts right D rises shifts right

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2025

28 Between June and the end of July 2016, the UK pound sterling depreciated by 11% against a basket of currencies of the UK’s major trading partners. The diagram shows the original aggregate demand curve AD1 and the original aggregate supply curve AS1 for the UK economy before June 2016. The equilibrium is at X. What would have been the new equilibrium for the UK economy as a result of the depreciation of the pound sterling? price level AS1 A B X D C AD1 O real output

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2025

20 What might be a consequence of a fall in the domestic price level? A imports become more competitive B interest rates increase C the purchasing power of savings falls D the real value of incomes increases

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2025