Explanation​:
On a Keynesian AS curve, supply is perfectly elastic when there are many unused resources in the economy. The curve becomes perfectly inelastic as factors of production become increasingly scarce.

The more excess capacity there is (Point $A$), the more impact expansionary fiscal policy will have on real output.

Choices B and C show increased competition for economic capacity, so expansionary fiscal policy increases real output by a smaller amount.

Choice D shows no excess economic capacity, so expansionary fiscal policy will not increase real output.

Options A, B, and C are the three dimensions in which poverty is measured using MPI

Explanation​:

The following are adjustments made to GDP to allow for more accurate comparisons over time and between countries:

• • Adjustment for inflation: converts nominal figures into real figures
• • Adjustment for nationality: converts GDP to GNI
• • Adjustment for population size: converts total figures into per capita figures

While inflation, nationality, and population size are commonly adjusted for, there is no commonly used national income measure that adjusts for inequality (Choice D). While it is useful to measure income inequality and use it to compare between countries, it is not necessarily relevant to GDP calculations and adjustments.

Explanation​:
Choice D is the correct answer because if consumer confidence and business confidence are weak or pessimistic, they would have a dampening effect on the effectiveness of interest rate decreases. If so, consumption and investment spending will not increase as much as desired.

The following are strengths of monetary policy:

• Choice A gives the central bank flexibility in responding to changing economic conditions.
• Choice B allows the central bank to make more targeted changes to the economy.
• Choice C gives the central bank more freedom because it can reverse policies that do not achieve the desired effect.

Explanation​:
Statement I is correct because deregulation lowers production costs and makes it easier for new competitors to enter the market. These outcomes encourage competition.

Statement II is incorrect because personal income tax cuts fall under market-based supply-side policies relating to incentives, rather than encouraging competition.

Statement III is correct because removing barriers to trade will allow foreign businesses to compete with domestic businesses. This competition incentivises domestic firms to be more efficient.

Statement IV is incorrect because abolishing minimum wages falls under market-based supply-side policies that are aimed at making the labour market more flexible rather than policies to encourage competition.

Explanation​:
Expansionary fiscal policy can decrease net exports (X-M) as increases in the price level can make exports less competitive, and rising incomes will increase spending on imports.

Choice B is wrong, as fiscal policy has no direct relationship with the money supply.

Choices C and D are wrong, as expansionary fiscal policy stimulates economic activity, increasing the employment and inflation rates.

Explanation​:
The aggregate demand shifts rightward (AD1​ to AD2​) when a component of AD increases. The components of AD are consumption (C), investment (I), government spending (G), and net exports (NX), which are calculated as exports (X) minus (M).

Choice I is incorrect because a future decrease in price levels will incentivise people to reduce consumption.

Choice II is correct because a reduction in interest rates boosts consumption and investment.

Choice III is incorrect because an increase in income taxes reduces disposable income and leads to a fall in consumption.

Choice IV is correct because an increase in income of trading partners increases a country's exports, increasing net exports.

Explanation​:
Statement I is incorrect because an increase in interest rates will lead to higher borrowing costs and a higher reward for saving, resulting in decreased investment expenditure and consumption, thus decreasing AD, not SRAS.

Statement II is incorrect because lower consumer confidence will lead to lower consumption expenditure and decreased AD, not SRAS.

Statement III is correct because higher costs of production across the economy will shift the SRAS curve to the left.

Statement IV is correct because an increase in indirect taxes will also raise the costs of production for businesses and thus shift SRAS to the left.

Explanation​:
Budget deficits are financed through borrowing, which will $\text{‘}$crowd out$\text{’}$ private investment. Increased government borrowing makes loanable funds scarcer, driving up their price (interest rates).

Choices A, B and C are wrong, as sustained budget deficits increase AD and therefore the level of economic activity, resulting in:

• decreased net exports (X-M), which move the country towards a current account deficit
• increased inflation
• decreased unemployment

Explanation​:
There is often a conflict between achieving economic growth and environmental sustainability. The pursuit of better economic well-being for citizens and increased efficiency of the economic system does not always guarantee environmental sustainability.

Economic growth is often accompanied by job creation and improvements in the standard of living of many citizens, so choices A and B are likely to be true. Economic growth often means an increase in total output produced by the economy, which involves the use of more resources and the production of more waste, so choice C is likely to be true.

It is least likely that economic growth is accompanied by decreases in greenhouse gas emissions, and thus choice D is the least likely to be true.

Explanation​:
Statement I is a limitation because interventionist supply-side policies involve a long time lag between implementation and seeing the desired effects.

Statement II is not a valid point when discussing the effectiveness of interventionist supply-side policies (these polices are very costly and do burden the government budget).

Statement III is an advantage of interventionist supply-side policies because the government can target the sectors it deems most important for growth.

Explanation​:
LRAS shifts rightward when there is an increase in the quantity or quality of factors of production (FOPs), improvements in technology, increases in efficiency, or improvements in institutions.

Choices I and II: both will shift LRAS to the right. An increase in immigration increases the quantity of labour, and improvements in technology will increase efficiency in production, improving the quality of FOPs.

Choices III and IV are determinants of SRAS that would lower production costs and thus shift the SRAS curve rightward. Indirect taxes and production costs do not affect the quality or quantity of FOPs, so LRAS is unaffected.

Explanation​:
When the short-run RGDP equilibrium level exceeds the full employment level of GDP, the economy is experiencing an inflationary gap. Contractionary monetary policy is required to decrease aggregate demand, which involves shifting the AD curve to the left. This shift reduces both the aggregate price level and the short-run RGDP equilibrium level, ultimately helping to close the inflationary gap.

I and IV are examples of contractionary monetary policy.

II and III are examples of expansionary monetary policy.

Explanation​:
A decrease in aggregate demand will create a recessionary gap and push the economy into recession. This creates cyclical unemployment, which is caused by a decrease in overall aggregate demand, and so businesses decrease their demand for labor.

Choices A, C, and D are also types of unemployment, but they are not caused by a decrease in aggregate demand.

Explanation​:
Choice D incorrectly describes speculative demand for money. It suggests that money has inherent value and that people speculate on the appreciation of money itself. However, speculative demand for money occurs when people anticipate a change in interest rates and prefer to hold money over interest-bearing assets.
Choice A describes the transactions motive.
Choice B describes the precautionary motive.
Choice C describes the speculative motive.

Explanation​:
Changes in taxation and government spending can be directed towards different socioeconomic groups or different branches of industry.

Choice B is wrong because there are many trade-offs in achieving macroeconomic goals. For example, increased economic growth and employment can cause high inflation and/or a current account deficit.

Choice C is wrong as it can take time:

• for governments to recognise that action is required in the first place
• for political bodies to agree on what to do
• for the policy to impact the economy

Choice D is wrong because expansionary fiscal policy will have a greater impact on real output if there is plenty of excess capacity in the economy.

Explanation​:
There is often a conflict between achieving economic growth and equity in the distribution of income.

The pursuit of better economic well-being for citizens and increased efficiency of the economic system does not always guarantee an equitable distribution of the benefits.

Choices A and C are also possible conflicts with the goal of high economic growth, while choice B often accompanies high economic growth.

Explanation​:
When AD decreases (AD to AD11​), the economy will be producing below its full-employment level of output: this is known as a recessionary gap.

During a recessionary gap, unemployment rises as businesses lay off workers in response to decreasing aggregate demand.

Choice A would be correct if AD shifted rightward.

Choice C would be correct if SRAS shifted leftward.

Choice D is not possible, as rising unemployment is a defining characteristic of a recession.

Explanation​:
Choice A is the correct answer by definition. Quantitative easing is a process where a central bank buys long-term government bonds (and other financial assets) from commercial banks (other financial institutions) and credits their accounts with electronic reserves as digital entries held by the commercial banks at the central bank.

Explanation​:
Choice D is the correct answer because it shows that the equilibrium price level would increase without any increase in the equilibrium GDP level. This occurs when the economy has reached the full employment real GDP and there are no unused factors of production. Increasing AD causes inflation without any growth to real GDP.

Choice A is incorrect because it shows a scenario of growth without any inflation.
Both choices B and C depict a scenario of growth with inflation where both the equilibrium APL and real GDP increase.

Explanation​:
Governments borrow by issuing bonds, which domestic or overseas individuals or entities (such as commercial or central banks) can purchase.

Choice A is incorrect because transfer payments only entail a redistribution of income. They do not directly increase demand for a nation’s goods or services.

Choice B is incorrect, as contractionary fiscal policy lowers inflation, making exports more competitive. Additionally, contractionary fiscal policy suppresses consumer spending, including spending on imports.

Choice D is incorrect, as fiscal policy can redistribute income by adjusting income tax and transfer payment policies.

Explanation​:
The goals of a central bank are focused on achieving short-term economic stability. These objectives include achieving low and stable inflation, implementing inflation targeting (choice A), reducing unemployment rates (choice B), and minimizing fluctuations in the business cycle (choice D).

Choice C is the correct answer because it is usually attributed to the goal of the executive branch of government and not the central bank.

Explanation​:
An excise tax is a tax paid on specific commodities like cigarettes or petrol. It is a tax on expenditure, therefore it is an indirect tax.

Options A, B, and D are examples of direct taxes.

• Option A: as it is a tax on the wealth of an individual.
• Option B: as it is a tax on the income of companies.
• Option D: as it is the tax on the income of individuals.

Explanation​:
An increase in the corporate tax rate will decrease AD by decreasing investment in the economy.

Choices B and D redistribute income in a way that should increase consumption, as the marginal propensity to consume for lower-income households tends to be higher.

Choice C is wrong, as increasing government spending directly increases AD.

Explanation​:

The AS curve shifts when there are changes in the costs of factors of production or indirect taxes (VAT). The AD curve shifts when there is a change in domestic consumption, investment, government spending, or net exports.

A cut in income tax would increase AD (AD1​ to AD2​), increasing disposable income and domestic consumption. A rise in indirect taxes would decrease AS (AS1​ to AS3​), as it would increase production costs across the economy.