February/March 2026 Paper 32

2026 · 30 questions · 30 parts · 30 marks

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24Government Aims Roles Policy ConflictsHard1 mark

The diagram shows an economy in short-run equilibrium with price level

P_{2}

and output level

Y_{2}

.

diagram of an economy in short-run equilibrium: a vertical long-run aggregate supply curve LRAS, an upward-sloping short-run aggregate supply curve AS, and two aggregate demand curves AD1 and AD2 (AD2 further to the right); AD1 crosses AS and LRAS together at equilibrium E1 with price level P1 and output Y1, while AD2 crosses AS at equilibrium E2 with the higher price level P2 and the higher output Y2

Which combination is most likely to be achieved in the economy at the equilibrium point

E_{2}

?

	macroeconomic policy aim	macroeconomic policy aim
A	reduced current account deficit	increased international competitiveness
B	reduced rate of inflation	reduced exchange rate
C	increased level of employment	increased per capita income
D	increased economic growth	reduced environmental degradation