2 (a) Which one of the following diagrams illustrates the impact of an increase in net exports along a Keynesian long-run aggregate supply curve? A B C D (b) Using the classical long-run aggregate supply curve, explain what will happen in the long run to real output if aggregate demand increases - Edexcel - A-Level Economics A - Question 2 - 2021 - Paper 2

In the long run, there would be no change in real output. Classical economists argue that the economy will operate at full employment regardless of changes in aggregate demand. Therefore, the long-run aggregate supply curve is vertical, indicating that shifts in aggregate demand do not affect real output.

Annual fiscal deficits increase the national debt as the government borrows to cover the shortfall between its expenditures and revenues. This can lead to a larger debt burden for future generations, potentially resulting in a negative wealth effect and decreased consumer confidence and consumption.