Economics (AS & A Level) · May / June 2023 · Paper 12 · Question 27

The diagram shows the current equilibrium of an economy. The government introduces a contractionary monetary policy. [diagram: AS/AD diagram with price level on vertical axis and output on horizontal axis] What is the most likely outcome?

1. Aa fall in investment and a fall in inflation
2. Ba fall in investment and a rise in inflation
3. Ca rise in investment and a fall in inflation
4. Da rise in investment and a rise in inflation

As printed in the paper