Use Edexcel IAL Economics 2.3.3.3b questions to explain how productivity, skills, demography or regulation changes alter long-run productive capacity.
Between 2022 and 2023, Australia's productivity fell by 3.7%. Draw an LRAS and AD diagram to show the impact of this change in productivity on the average price level and real output.
Knowledge 1, Application 3
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written, graphical and tabular forms.
Knowledge
1 mark for drawing original AD and LRAS curves with correctly labelled axes
Application
Up to 3 marks for the following information on the diagram:
- Leftward shift of LRAS (1)
- Lower real output;
mark not awarded for 'quantity' (1)
- Higher price level;
mark not awarded for 'price' (1)
NB Accept either Keynesian or Classical LRAS curves
NB Depending on the level of spare capacity shown on the diagram, using a Keynesian LRAS curve price level and real output may decrease or stay the same
(4)