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Economics (AS & A Level) · Feb / March 2025 · Paper 12 · Question 18

9708Aggregate Demand and Aggregate Supply analysis

The diagram shows aggregate demand (AD) and long-run aggregate supply (LRAS) with X as the initial equilibrium. Which combination of policy and new final equilibrium point is correct?

  1. Aincreased direct taxation — F
  2. Bincreased government spending on infrastructure — G
  3. Cappreciation of the exchange rates — H
  4. Ddecreased interest rates — J

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Correct answer: B. increased government spending on infrastructure — G

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