Academic Review 2024

AD

Real GDP

Q

Q

58 ST EDWARD’S, OXFORD

When firms are making more profit, they have more of an incentive to invest and increase capital stock in the long term, therefore shifting the LRAS curve to the right as well. As a result of both these shifts in aggregate supply curves, total output and real GDP will increase in the UK whilst also relieving pressures on average price level. Furthermore, all these changes will also have an influence on the consumer side of the economy. Cost of living will fall for all households in the UK. This will be a result of cheaper energy bills and overall reduction of inflation. Households will therefore have both more disposable income and a higher real income, and as a result of this consumption will increase. As both investment and consumption are components of aggregate demand, there will be an increase from AD1 to AD2 as seen on figure 4 (Pettinger, 2017).

Figure 4: Increase in AD and LRAS Diagram

PL

LRAS 1

LRAS 2

P2 P1

AD 2

AD 1

Real GDP (Y)

Y1

Y2

www.economicshelp.org

Hence there is a growth of real GDP in the UK. This shows that there is a direct link between the abundance of energy in an economy and its rate of growth.

“ Cost of living will fall for all households in the UK. ”

Evaluation The research for this essay was primarily done online through articles, research papers and books. Every time I found a new source online, the first thing I checked was the date of publication or when it was last updated and the credibility of the source. A lot of the information I was using, for example, came from the World Nuclear Association website, and all of its articles have been updated at the latest

in early 2022. Another thing I had to consider was bias when using information from private companies such as First Light. These companies obviously aim to give a positive view of themselves and the information they release may be an overestimate of what they can actually do. They will most likely be using marketing techniques as well to attract attention and investment.