May/June 2026 Paper 12

2026 · 30 questions · 30 parts · 30 marks

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20Aggregate SupplyHard1 mark
The diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for a country. The initial level of national income is given by .
an aggregate demand and aggregate supply diagram, price level on the vertical axis and real GDP on the horizontal axis: a downward-sloping AD curve and an AS curve that is flat at low output and becomes steep near the initial national income level Y$_{1}$, where the two curves cross; four labelled points sit near that crossing: A (on AD, just to its left), B (just to the right of the crossing, at a similar higher price level to A), C (on AD, further right and lower than B) and D (on AD, further left and lower than A, at about the same price level as C)
What is the most likely new equilibrium point if there is increased productivity in the manufacture of goods produced for the domestic market?