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UK CRAS
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SRAS
SRAS (

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AD

y je Reut
2
GDP

there sustained in rale

If
the
was a
appreciation of
the
the
pand
decrease
stay againstthe
other Currencies cost
of living
world standar
better This
; and

other
living
of will
would
get
.
is because avercies appear cheape
then
theringthis importing
the would become
pand , cheaper .

For costs
give in the UK at
decease
meaning
mene
,
,

level able to
any given price ,
they are
produce a
grante
to This
output ·

Three SRAS Shifts fun SRAS SRAS

leads to at
C now macroeconomic
equilitrim Yse
and PL ,
I showing
that real GDP has increased has
;
and the rate
of inflation
This leads standin
dining
decreased . to a
greater of as
people
have more
disposable income
S
(national output meaning
= national
income) ;
wants
they un
spend more on economic
gain greater utility
.
and

Havener same that in the

appreciativ
an

may argue
would UK
pai also mean consumers
import and more
,

UK less to the
Sine in the
may expert due
pand ,

This
being relatively
could lead
n av more
expensive .
to downward demand which
shighs in
agreggate ,
would
lead to les real GDP , which sustained 2
j
or more
far
became Not
quartes' would a recession .
only does this mean
 Consumers have less
disposable incomes and
trogan
lower
f life it also busines
quality ; mean
a

meaning fire
be low
in
confidence
not
in
invest in
economy will
less will
;
start
↑
capital , give
etc
up
.

I he reduced
enterprise with

negative net

will
investment inthe
leading eomy a
quantitya Capital
reducing
cause the productive capacity in the
economy
to

shrink CLRAS chist inwards)

. However
,
the AD chists are
going
to

have the to
a much smaller
impact increases proce
costs (SRAS shift) as the UK is a service-led
economy , (81 % o CD)
AD will not
shift PPP an
significantly Big
the Mac
meaning be
.

should
Index abo considered when
Looking at the
effects of
m
appreciation of the pound .

They can show

if
the
pound is

being under or overvalued in the exchange market compared

to other

of life changesthe
In
currencies and can be an indicator
of quality .

2021
,
the
Big Mac Index
for the UK was $5 .
90
, compared to US's

$5 .
69 .
Over all
, due to the UK
being a service-led
,
economy
standard with
of ling
the increase and there will be
gall
a

in the costs
cost
of living ,
as increase in
gar
domestic
firs
will
chigt SRAS dam
by
a much
greater extent than AD

will
shift downwards .