Economic growth

A government chose to cut income tax and raise sales tax. The starting equilibrium is marked by X on the aggregate demand (AD) and aggregate supply (AS) diagram. Which equilibrium point would result after these tax changes?

Feb/March 2016

What would an expansionary fiscal policy cause to rise?

Feb/March 2016

Outline the components of aggregate demand and explain one cause of an increase and one cause of a decrease in aggregate demand in an economy.

Feb/March 2016

An increase in the curve linking consumption and national income could be brought about by

Feb/March 2016

Assess the ways in which changes in interest rates may influence investment.

Feb/March 2016

In what way does an increase in the price of factors of production impact the aggregate supply (AS) curve?

Feb/March 2017

In the diagram, AD1 shows an economy’s starting aggregate demand curve. What might make the curve move to AD2?

Feb/March 2017

The diagram presents four potential aggregate supply curves together with an equilibrium point X. A government introduces deflationary fiscal policy to bring down the inflation rate in its economy. As a result, aggregate demand moves to AD2. For which AS curve would this policy be least effective?

Feb/March 2017

For a closed economy with no government expenditure or taxation, the starting income is $2000 million. Consumers are responsible for all saving and save 25% of any income received above $2000 million. Businesses intend to invest $2000 million. What is the value of the multiplier?

Feb/March 2017

An aggregate demand curve slopes down from left to right. One explanation for this is that a decrease in the average price level will cause

Feb/March 2018

In the diagram, the economy starts from equilibrium at point X. The government raises spending on education. This happens at the same time as an increase in wage rate inflation. Which point indicates the economy’s most likely short-run equilibrium?

Feb/March 2018

By what is the deflationary gap measured?

Feb/March 2018

The table below sets out an economy’s consumption function. income ($m) / consumption ($m): 100/90, 140/122, 180/154, 220/186 What may be concluded about the value of the marginal propensity to consume in this economy?

Feb/March 2018

Explain the difference between autonomous investment and induced investment. Consider whether there is a link between these two types of investment.

Feb/March 2018

The diagram illustrates an aggregate supply curve together with aggregate demand curves. What could lead to aggregate demand falling from AD1 to AD2?

Feb/March 2019

The diagram illustrates aggregate demand (AD) and aggregate supply (AS) in an economy. The starting equilibrium is at point E. What leads to the movement of the aggregate supply curve from AS to AS1 and from AS to AS2?

Feb/March 2019

Identify two policies adopted by the Polish government that could be considered as supply-side policies.

Feb/March 2019

For an open economy that also includes a government sector, the marginal propensity to import is 0.3, the marginal propensity to tax is 0.3 and the marginal propensity to save is 0.2. What is the value of the multiplier?

Feb/March 2019

A central bank predicts that raw material costs will increase. The government intends to raise spending on health and education. The starting equilibrium position is marked by X on the aggregate demand, AD, and aggregate supply, AS, diagram. Which new equilibrium point would occur in the short run if the predictions are correct and the government plans are carried out?

Feb/March 2020

For output in a closed economy to rise, aggregate demand must increase. What has to occur for this rise in output to be brought about in the economy?

Feb/March 2020

Explain using aggregate demand and aggregate supply diagrams the difference between cost-push inflation and demand-pull inflation and explain one cause of each.

Feb/March 2020

What do Keynesians assume?

Feb/March 2021

Starting from the equilibrium position illustrated, government spending on goods and services rises while the production costs of goods and services also rise at the same time. Which option most accurately describes the probable effect on the economy?

Feb/March 2022

The diagram illustrates a change in an economy’s aggregate demand curve from AD1 to AD2. Which factor could not have caused this change?

Feb/March 2022

Using Fig 1.1, describe how Turkey’s current account balance changed between August 2019 and April 2020.

Feb/March 2022

The diagram illustrates rises in both aggregate demand, from AD1 to AD2, and aggregate supply, from AS1 to AS2. Which diagram shows the output gap after the increase in AD and AS?

Feb/March 2022

Which statement would be linked to Keynesian economic theory?

Feb/March 2022

In a closed economy with no government sector, the multiplier indicates the effect of a change in

Feb/March 2022

The diagram illustrates the aggregate demand (AD) and long-run aggregate supply (LRAS) curves for a country, with X marking the initial equilibrium point. During one year, more than one million foreign workers departed from the country, and at the same time the country’s currency appreciated against the currencies of its major trading partners. Which new equilibrium position is most likely for this country?

Feb/March 2023

Using Fig. 1.1, compare the US inflation rate from July to December 2020 with that from January to June 2021.

Feb/March 2023

Which factor is least likely to bring about a simultaneous rise in demand-pull and cost-push inflation?

Feb/March 2024

Aggregate demand in an economy may fall due to a rise in

Feb/March 2024

The diagram illustrates aggregate demand (AD) curves for an economy. Which combination is most likely to have led to the movement from AD1 to AD2?

Feb/March 2024

How is effective demand defined?

Feb/March 2024

Using an aggregate demand and aggregate supply diagram, explain how a fall in interest rates could generate economic growth and consider whether economic growth will always lead to inflation.

Feb/March 2024

The government raises interest rates to lower the inflation rate. What else will this action cause?

Feb/March 2024

The diagram depicts aggregate demand (AD) and long-run aggregate supply (LRAS), with X marking the starting equilibrium. Which pairing of policy and new final equilibrium point is correct?

Feb/March 2025

A government chooses supply-side policy to raise long-run aggregate supply (LRAS). Why is it most likely that this policy instrument will not cause the price level to decrease?

Feb/March 2025

What is explained by the accelerator principle?

Feb/March 2025

The diagram represents a closed economy without government intervention. It starts in equilibrium when national income is $1000 million. If full employment national income is $800 million, what is the size of the inflationary gap?

Feb/March 2025

Explain how a rise in consumer spending affects China’s national income.

May/June 2005

Explain how changes in interest rates might influence investment.

May/June 2006

There is concern that if the government raises taxes, national income will decrease. Explain whether this must always be the case.

May/June 2008

The diagram illustrates the link between household income and household consumption. What would be likely to make the household consumption curve move from C1 to C2?

May/June 2010

The diagram illustrates a consumption function for a closed economy with no government. What conclusion can be drawn from the diagram?

May/June 2010

In the diagram, AS1 represents an economy’s long-run aggregate supply curve. What would make the aggregate supply curve move from AS1 to AS2?

May/June 2010

The diagram illustrates the link between household income and household consumption. What would be likely to make the household consumption curve move from C1 to C2?

May/June 2010

The diagram shows AS1 as the economy’s long-run aggregate supply curve. Which change would make the aggregate supply curve move from AS1 to AS2?

May/June 2010

If the money supply remains fixed, a fall in economic activity

May/June 2010

The diagram illustrates the link between household income and household consumption. What is likely to make the household consumption curve move from C1 to C2?

May/June 2010

The diagram illustrates a consumption function for a closed economy without government. What conclusion can be drawn from the diagram?

May/June 2010

In the diagram, AS1 represents an economy’s long-run aggregate supply curve. What would make the aggregate supply curve shift from AS1 to AS2?

May/June 2010

Name two components of aggregate demand that are not referred to in the first paragraph of the extract.

May/June 2010

A firm undertakes a major investment. Analyse why the rise in national income from this investment could be greater in a closed economy with no government than in an open mixed economy.

May/June 2010

Which evidence in the data shows that the economic situation in the US improved after December 2008?

May/June 2010

What evidence in the data shows that the economic situation in the US improved after December 2008?

May/June 2010

What would decrease the value of the investment multiplier?

May/June 2011

The diagram illustrates a consumption function. When income rises, what happens to the average propensity to save and the marginal propensity to save?

May/June 2011

Assuming all other factors remain unchanged, what will lead to a fall in aggregate demand?

May/June 2011

What would lower the value of the investment multiplier?

May/June 2011

All else remaining constant, which factor would lead to a fall in aggregate demand?

May/June 2011

What would cause the investment multiplier to fall?

May/June 2011

The diagram illustrates a consumption function. When income rises, what happens to the average propensity to save and the marginal propensity to save?

May/June 2011

If all other factors remain unchanged, what would lead to a fall in aggregate demand?

May/June 2011

Explain how the impact of the Keynesian multiplier process would alter if a free-market closed economy became a mixed economy with foreign trade.

May/June 2011

An increase in investment will raise national income, whereas a rise in consumers' desire to save will lower national income. Explain why this occurs.

May/June 2011

A rise in investment will increase national income, whereas a rise in consumers' wish to save will lower national income. Explain why this happens.

May/June 2011

In what way does aggregate demand and aggregate supply analysis account for inflation in the short run?

May/June 2012

In the diagram, C1 represents the starting link between consumption and national income. What might make the consumption function move to C2?

May/June 2012

The diagram shows line YE, which represents the equilibrium income level at different levels of investment. What does the gradient of line YE measure?

May/June 2012

In the diagram, C represents an economy’s starting link between consumption and national income. Which curve could represent the economy’s revised consumption function after the rate of unemployment benefits is cut?

May/June 2012

For a closed economy without government intervention, the equilibrium income is $25 million, the full employment income is $30 million, and the deflationary gap is $1 million. What conclusions can be drawn from this information?

May/June 2012

In the diagram, C1 represents the original link between consumption and national income. What might bring about a shift in the consumption function to C2?

May/June 2012

If all other factors remain unchanged, what is likely to happen when interest rates in a country are reduced?

May/June 2012

What factors determine the level of investment, and how do changes in investment expenditure influence GDP?

May/June 2012

What is likely to happen to demand-pull inflation and cost-push inflation if indirect taxes rise?

May/June 2013

The diagram illustrates an economy’s output (AS and AD curves). What effect would a fall in net exports have?

May/June 2013

Explain how unemployment and inflation are measured.

May/June 2013

Define the components of aggregate demand and, using a diagram, explain how a rise in spending in an economy could lead to inflation.

May/June 2013

In a closed economy with no government, the marginal propensity to consume is 0.9. Full employment national income equals $60 000 m, while current national income stands at $40 000 m. By what amount must investment rise in order to reach full employment?

May/June 2013

The diagram depicts the short-run trade-off between a country’s inflation rate and its national output level. What might make the curve move to the left?

May/June 2013

According to monetarist theory, what short-run effect will an unanticipated rise in the money supply have on output and on the price level?

May/June 2013

What factors would make the multiplier effect of a rise in government spending on national income larger?

May/June 2013

In a closed economy with no government, the marginal propensity to consume is 0.9. Full employment national income equals $60 000 m, while the economy’s present national income is $40 000 m. To bring about full employment, by what amount must investment be raised?

May/June 2013

What outcome will follow an increase in interest rates?

May/June 2013

The diagram illustrates the short-run relationship between a country’s inflation rate and its national output level. What might make the curve move to the left?

May/June 2013

Explain how a fall in interest rates might affect the level of investment and, as a consequence, national income.

May/June 2013

The diagram shows macroeconomic equilibrium output and the price level shifting from Y and P to Y1 and P1. What might have caused this change?

May/June 2014

The diagram illustrates an economy’s aggregate demand curve together with two short-run aggregate supply curves. What might explain the change in real output from Y1 to Y2?

May/June 2014

Which of the following is not a possible cause of cost-push inflation?

May/June 2014

The table sets out a government’s expenditure and tax revenues during 2010-2013. What effect did the shifts in the government’s fiscal balance have on the national debt and on aggregate expenditure?

May/June 2014

According to the accelerator model, what will make the level of investment decrease?

May/June 2014

Within a closed economy with no government, consumption is 4/5 of income at all income levels. The current equilibrium income is $220 million. The full employment income is $240 million. By how much must investment rise to achieve full employment?

May/June 2014

If all other factors stay unchanged, what would cause aggregate demand to fall?

May/June 2014

The diagram illustrates how four parts of aggregate demand contributed to the change in US real GDP across the four quarters of 2010. Which component contributed the most, and which contributed the least, to the positive growth in real GDP in 2010?

May/June 2014

The table presents a government’s spending and tax receipts across 2010-2013. How did the shifts in the government’s fiscal balance affect the national debt and aggregate expenditure?

May/June 2014

In a closed economy with no government, if investment rises by $100 million, consumption rises by $300 million. What is the marginal propensity to consume?

May/June 2014

The government raises the unemployment benefit rate. Which diagram illustrates the resulting movement in the consumption function from C1 to C2?

May/June 2014

In 2012 it was reported that consumers should not be encouraged to save more and cut their debts. A rise in saving would create a Keynesian ‘paradox of thrift’ which would not aid economic growth. Instead, consumers should spend money on new purchases. (Source: The Times. 2011) (a) Explain and comment on what is meant by ‘the paradox of thrift’.

May/June 2014

Explain the meaning of a country’s national income multiplier and give two reasons why this multiplier may fall.

May/June 2014