A country with an open economy has an increasing demand for its exports and a fall in the supply of labour.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [12] (a) Identify the components of aggregate demand/supply affected by the two economic factors. Effect of increased demand for exports on aggregate demand. The effect of a labour shortage on costs of production and aggregate supply. Analysis of the effect on output and prices using aggregate demand and aggregate supply analysis.
2. [13] (b) Accept a response based on the stem of the question e.g. answers that discuss the effectiveness of monetary policy in causing the original shifts in the AD/AS. or Alternatively accept a response that discusses the effectiveness of monetary policy to address the changes resulting from the shifts that have taken place in 6a. Explanation and analysis of the role of monetary policy in changing AD/AS. The monetary transmission mechanism and its impact. A consideration of alternative policies. Explanation and analysis of the roles fiscal policy and supplied side policies could play in reducing the impact of the two factors.