(a) Explain how changes in the size of the circular flow depend on the relative size of injections and leakages.
(b) Evaluate the use of GDP for making comparisons of the standard of living over time.
(b) “Using real Gross Domestic Product (GDP) data is a very useful means of comparing economic activity between countries.” Discuss this statement.
(a) Describe the phases of the business cycle.
AD/AS
(a) Aggregate demand consists of consumption, investment, government spending and net exports (exports minus imports). Explain two factors that may influence consumption and two factors that may influence government spending.
(a) Explain the impact that a rise in the minimum wage might have on aggregate supply and gross domestic product (GDP) in an economy.
(b) Discuss why, in contrast to the monetarist/new classical model, an economy can remain stuck in a deflationary (recessionary) gap according to the Keynesian model.
(b) “Increases in aggregate demand result in inflation.” Evaluate this statement