Economics (AS & A Level) · May / June 2026 · Paper 11 · Question 30

The diagram shows the aggregate demand (AD) curve and two long-run aggregate supply (LRAS) curves for an economy. The government has reduced spending on welfare payments and increased spending on training for employment, so causing the shift from LRAS1 to LRAS2. What is most likely to happen as a result of this policy?

1. AAn improvement in the current account of the balance of payments.
2. BAn increase in inflation.
3. CAn increase in the budget deficit.
4. DAn increase in unemployment.

As printed in the paper