Macroeconomic equilibrium

Question 1

Macroeconomic equilibrium

Answer 1

SR or LR macroeconomic equilibrium occurs when SRAS or LRAS is equal to AD

Question 2

An increase in AD

Answer 2

This causes an increase in AS and a higher equilibrium level of national output (higher real GDP)

Question 3

A decrease in AD

Answer 3

This causes an decrease in AS and a lower equilibrium level of national output (lower real GDP)

Question 4

Fall in mortgage interest rates

Answer 4

Rise in disposable income for home owners > increase in consumer spending > Increase in AD

Question 5

Rise on global copper prices

Answer 5

Costs more to import copper > Increased COP > Decreased SRAS > Decreased Real GDP and Increased inflation

Question 6

Wage subsidies paid to producers

Answer 6

Government helps to cover labour costs > Unit wage costs will fall > Lower COP > Increased SRAS > Increased Real GDP and Decreased inflation

Question 7

Increased government spending on public services and training schemes

Answer 7

High government spending > Increased AD
High spending on training > Decreased COP > Increased SRAS

Question 8

Fall in net labour migration in economy

Answer 8

Less people working > Increased wages >Decreased SRAS
Less people > Lower consumption > Decreased AD