A government attempts to stimulate economic recovery by increasing aggregate demand (AD). All other things being equal, in the short run, which one of the following combinations is most likely to result from this expansion of AD?
Inflation rate: Decreases; Level of unemployment: Increases; Balance of payments on current account: Improves
Inflation rate: Increases; Level of unemployment: Decreases; Balance of payments on current account: Worsens
Inflation rate: Increases; Level of unemployment: Decreases; Balance of payments on current account: Improves
Inflation rate: Decreases; Level of unemployment: Increases; Balance of payments on current account: Worsens
327 exam-style questions on AQA A Level Economics 2.3 Economic performance, covering 2.3.1 Economic growth and the economic cycle, 2.3.2 Employment and unemployment, 2.3.3 Inflation and deflation, and 2.3.4 Possible conflicts between macroeconomic policy objectives. Each one has a worked solution and a mark scheme showing where the marks go.