CAIE A-Level Economics AS 5.4.4 Supply Side Policy in Ad As Questions

Practise using AD/AS analysis to trace supply-side policy effects on national income, output, prices and employment in CAIE Economics AS questions.

Exam points

Use AD/AS analysis to explain how supply-side policy changes equilibrium national income, real output, prices and employment.

[Maximum number: 1]

The diagrams show a country's aggregate demand $\left(\mathrm{AD}_{1}\right)$ and aggregate supply $\left(\mathrm{AS}_{1}\right)$ 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?

Option A shown in diagram

Option B shown in diagram

Option C shown in diagram

Option D shown in diagram

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