Economics (AS & A Level) · Feb / March 2022 · Paper 12 · Question 22

From the initial position of equilibrium shown, there is an increase in government expenditure on goods and services and simultaneously an increase in the costs of production of goods and services. What best describes the likely impact on the economy?

1. Aequilibrium level of national income: falls; equilibrium level of prices: uncertain
2. Bequilibrium level of national income: no change; equilibrium level of prices: no change
3. Cequilibrium level of national income: rises; equilibrium level of prices: rises
4. Dequilibrium level of national income: uncertain; equilibrium level of prices: rises

As printed in the paper