CAIE A-Level Economics 4.3.12 Aggregate Demand and Supply Shift Effects

CAIE A-Level Economics 4.3.12 Aggregate Demand and Supply Shift Effects
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise locating new AD/AS equilibria after demand or supply shocks and judging changes in real output, price level and employment under spare-capacity or full-employment…

How this is tested

  • identify whether the shock shifts AD, SRAS or LRAS and draw the correct direction
  • read the new equilibrium to state changes in real output, price level and employment
  • evaluate inflation or deflation effects using spare capacity, full employment and shock size

Question 18

[Maximum number: 1]

The diagram shows aggregate demand (AD) and aggregate supply (AS) where the initial equilibrium

is at point X .

The central bank forecasts a rise in raw material costs. The government plans to increase spending

on health.

What would be the new equilibrium in the short run if the forecasts prove to be accurate and the

government plans are implemented?

Figure for Question 18 — CAIE A-Level Economics
A
Option A shown in diagram

Option A shown in diagram

B
Option B shown in diagram

Option B shown in diagram

C
Option C shown in diagram

Option C shown in diagram

D
Option D shown in diagram

Option D shown in diagram