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WalesEconomicsQuick questions
Economics in Action (AS Unit 2)
Quick questions on AD/AS interaction and the two views - WJEC A-Level Economics
3short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is macroeconomic equilibrium?Show answer
Just as in a single market, equilibrium is found where the two curves intersect. If planned spending exceeds output, firms run down stocks and raise output and prices; if output exceeds planned spending, stocks build up and firms cut output and prices, until equilibrium is restored. A shift in AD or AS moves the equilibrium. The key macroeconomic question is what happens to real output (and hence employment and growth) versus the price level (inflation) when a shift occurs, and that depends on the shape of the aggregate supply curve.
What is q1?Show answer
Define macroeconomic equilibrium. [2 marks]
What is q2?Show answer
Explain why, on a vertical long-run aggregate supply curve, an increase in aggregate demand only raises the price level. [3 marks]
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