AD and AS

The diagram shows a shift in an economy’s aggregate demand curve from AD1 to AD2.

What could not be a cause of the shift?

• a decrease in income tax

• a decrease in the price of goods

• an increase in money wage rates

• an increase in the money supply

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?

• A

• B

• C

• D

Why might a country’s government impose a tax on fuel exports?

• to encourage domestic refineries to increase production

• to improve the country’s trade balance

• to reduce fuel prices for domestic consumers

• to reduce the government’s budget surplus

Which statement about a rise in the general price level in a country is correct?

• It is likely to create economic winners and losers in the country.

• It is never acceptable to modern governments.

• It means that no goods have fallen in price.

• It must make the average citizen poorer.

What will cause a movement along an aggregate supply curve?

• a rise in the demand for exports

• a rise in the price of raw materials

• a rise in the productivity of labour

• a rise in the rate of sales tax

Government spending for a year includes these items.

What is the total of transfer payments by this government in $m?

• 50

• 500

• 750

• 800

What would be certain to cause a fall in a country’s cost of living?

• a fall in real incomes

• a fall in the inflation rate

• a negative inflation rate

• a reduction in direct tax rates

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?

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• 
• 
• 

The diagram shows aggregate demand (AD) and aggregate supply (AS) for an economy.

What is most likely to cause the shift from AS1 to AS2?

• a decrease in the exchange rate

• a decrease in the price level

• a fall in immigration

• a fall in the average level of wages

What is an example of a transfer payment?

• a household moving savings from one bank account to another

• a monthly repayment on a loan used to buy a new cooker

• the amount paid to transport goods from one city to another

• the payment of student grants by the government