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Economic growth and lower unemployment

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Reference no: EM133129035

Evaluate whether a rise in consumer and business confidence would always lead to economic growth and lower unemployment

Step 1: Draw a diagram showing the effect of greater consumer and business confidence on AD. (Don't shift LRAS at this stage)

Step 2: Analyse the diagram. Aim to explain how greater consumer and business confidence will lead to economic growth and lower unemployment.

Step 3: Evaluate - A good point would be to say that the effect described above depends upon the size of the output gap (spare capacity)

Step 4: Draw a second diagram showing how greater business confidence would affect LRAS.

Step 5: Analyse the second diagram. Make sure to link your analysis to long run growth.

Step 6: Evaluate your diagram - You could discuss some of the other determinants of investment.

Step 7: Come to a conclusion. Make a judgement that answers the question. You could say that the effect on unemployment depends on what is causing the unemployment.

Reference no: EM133129035

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