Equilibrium levels of real national output 2.4.3 unit 29

Question 1

What will cause aggregate demand to increase?

Answer 1

• A fall in interest rates will raise both consumption and investment.
• A fall in exchange rates will boost exports and reduce imports.
• A lowering of income tax tax will raise consumption because households will now have higher disposable income.

Question 2

What could decrease SRAS to decrease?

Answer 2

• Wages for workers may increase.
• Raw materials price may increase.
• Taxes on goods and services might be raised by the government.

Question 3

Graphs in the text book.

Answer 3

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