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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
Question 2
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... show full transcript
Worked Solution & Example Answer: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
Step 1
Which one of the following diagrams illustrates the impact of an increase in net exports along a Keynesian long-run aggregate supply curve?
Answer
The only correct answer is A. This diagram shows an increase in aggregate demand (AD) due to rising net exports, leading to a higher equilibrium output level while the price level remains unchanged in the long-run perspective.
Step 2
Using the classical long-run aggregate supply curve, explain what will happen in the long run to real output if aggregate demand increases.
Answer
In the long run, there would be no change in real output. This is because classical economists believe that the economy operates at full employment in the long run. An increase in aggregate demand would lead to higher price levels without affecting the overall output, as shown in the classical long-run aggregate supply curve.
Step 3
Explain the impact of annual fiscal deficits on the US national debt.
Answer
Annual fiscal deficits can lead to an increase in the US national debt. The government borrows money to cover the shortfall between expenditures and revenues, which accumulates over time, resulting in a rising debt burden. This can have repercussions such as reduced investment in the economy and potential impacts on overall economic growth.