Question

List at least three sources of positive economic growth in an economy and discuss how these sources affect aggregate supply withing the AD/AS model. In the discussion, pay particular attention to

1. national output

2. unemployment

3. inflation.

Your discussion must be illustrated by the AD/AS model.

Answer 1

three sources of positive economic growth are:

increase in investment, increase in government expenditure, increase in the country's exports.

all of these developments lead to an upward shift in the AD curve. given and upward shift in AD curve, there will be an increase in the output and an increase in the prices. since output is increasing therefore more workers are needed to produce that increased output and hence unemployment will decrease. since prices are increasing therefore inflation will rise