1. Explain why the short-run average supply curve slopes upwards. [4 marks] 2. Assume there is...

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1. Explain why the short-run average supply curve slopes upwards. [4 marks] 2. Assume there is an increase in the equilibrium level of employment in the labour market. Fully explain how this change would affect the long-run and short-run aggregate supply curves. [6 marks] 3. Assume the South African government is considering increasing its expenditure on build- ing roads or lowering taxes. Assume the initial equilibrium level of real GDP is R16 and the equilibrium price level is R100. Graphically illustrate how the government's increase in expenditure versus a decrease in taxes would affect the level of real GDP. [5 marks] 4. Now assume that the South African government decides to increase expenditure on roads. Graphically illustrate and explain how this could lead to inflation. Assume an initial level of real GDP of R16 and a price level of R100. [10 marks] 5. Graphically illustrate and define the three types of macroeconomic equilibria. You are not expected to use numbers in your graph. [10 marks] 1. Explain why the short-run average supply curve slopes upwards. [4 marks] 2. Assume there is an increase in the equilibrium level of employment in the labour market. Fully explain how this change would affect the long-run and short-run aggregate supply curves. [6 marks] 3. Assume the South African government is considering increasing its expenditure on build- ing roads or lowering taxes. Assume the initial equilibrium level of real GDP is R16 and the equilibrium price level is R100. Graphically illustrate how the government's increase in expenditure versus a decrease in taxes would affect the level of real GDP. [5 marks] 4. Now assume that the South African government decides to increase expenditure on roads. Graphically illustrate and explain how this could lead to inflation. Assume an initial level of real GDP of R16 and a price level of R100. [10 marks] 5. Graphically illustrate and define the three types of macroeconomic equilibria. You are not expected to use numbers in your graph. [10 marks]

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1 Shortrun Average Supply Curve In the short run the average supply curve slopes upwards due to diminishing marginal returns As a firm increases its o... View the full answer