The table below shows potential macroeconomic events causing shifts in the aggregate demand (ADADAD), short-run aggregate supply (SRASSRASSRAS) and long-run aggregate supply (LRASLRASLRAS) curves for an open economy. All other things being equal, which combination is correct?
| AD AD\,AD shifts to the right | SRAS SRAS\,SRAS shifts to the left | LRAS LRAS\,LRAS shifts to the right | |
|---|---|---|---|
| A | Value Added Tax (VAT) rate is increased | Corporation tax is decreased | The state pension age is lowered |
| B | House prices fall sharply | Adoption of more efficient manufacturing technology | Government spending on schools increases |
| C | The exchange rate of the domestic currency depreciates | Global energy prices rise | Net inward migration of skilled workers rises |
| D | The central bank increases interest rates | Raw material prices increase | Net investment in the economy becomes negative |
Option A
Option B
Option C
Option D
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.