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Economics (AS & A Level) · Feb / March 2025 · Paper 12 · Question 24

9708Supply-side policy

A government decides to use supply-side policy to increase long-run aggregate supply (LRAS). What is the most likely reason why this policy tool will not lead to a fall in the price level?

  1. AAggregate demand will also increase.
  2. BLabour productivity levels will increase.
  3. CWorkers will save any extra wages they earn.
  4. DWorkers will spend any extra wages on imports.

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Correct answer: A. Aggregate demand will also increase.

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