May/June 2026 Paper 11

2026 · 30 questions · 30 parts · 30 marks

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30Supply Side PolicyHard1 mark
The diagram shows the aggregate demand (AD) curve and two long-run aggregate supply (LRAS) curves for an economy.
A downward-sloping aggregate demand (AD) curve and two vertical long-run aggregate supply curves, LRAS₁ and LRAS₂, with LRAS₂ to the right of LRAS₁. Price level is on the vertical axis and real national output on the horizontal axis.
The government has reduced spending on welfare payments and increased spending on training for employment, so causing the shift from to .
What is most likely to happen as a result of this policy?