Diagram Drill

#Label From Memory | 8 Diagram Types | Common Errors Listed

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#THE NON-NEGOTIABLE AXIS LABELS

Memorise these exactly. Zero tolerance — wrong wording = K mark lost.

Y-AXIS: "Price level"
         NOT "Price" / NOT "Prices" / NOT "P" / NOT "Average price"

X-AXIS: "Real output" OR "Real GDP"
         NOT "Output" / NOT "Quantity" / NOT "Q" / NOT "Y"

These two labels are confirmed wrong in every WEC12 examiner report 2019–2026. The examiner is trained to reject informal alternatives. There are no acceptable variants beyond exactly "Price level" (Y) and "Real output" or "Real GDP" (X).

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#DRILL 1 — AD/AS CLASSICAL LRAS

What to draw:

• Y-axis: "Price level"
• X-axis: "Real output"
• LRAS: vertical line at Yfe, labelled "LRAS"
• AD: downward sloping, labelled "AD"
• Equilibrium: where AD meets LRAS — dot with P₁ and Y₁, dotted lines to both axes

Shift scenario: AD rises (expansionary demand-side policy)

• New AD: labelled "AD₁" (original) and "AD₂" (new, to the right)
• New equilibrium: P₂ (higher) at same Y₁ if at Yfe; or P₂/Y₂ if below Yfe
• Dotted lines from new equilibrium to both axes

Common errors confirmed in examiner reports:

1. "Prices" on Y-axis — K mark lost
2. "Output" on X-axis — K mark lost
3. Dotted lines to only one axis — App mark lost per equilibrium
4. AD shifted in wrong direction — App shift mark lost
5. LRAS drawn as upward sloping — fundamental error, K mark at risk

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#DRILL 2 — AD/SRAS (SHORT-RUN SUPPLY SHOCK)

What to draw:

• Y-axis: "Price level"
• X-axis: "Real output"
• SRAS: upward sloping, labelled "SRAS"
• AD: downward sloping, labelled "AD"
• Original equilibrium: P₁ and Y₁ with dotted lines to both axes

Shift scenario: Cost-push inflation (SRAS shifts left)

• SRAS₁ (original) → SRAS₂ (new, to the left, labelled)
• Arrow on SRAS showing leftward shift direction
• New equilibrium: HIGHER P₂ and LOWER Y₂ — dotted lines to both axes
• This demonstrates stagflation: higher price level AND lower output simultaneously

Why this diagram matters: Cost-push inflation is the ONLY scenario where rate rises cannot resolve inflation without worsening the growth objective — because SRAS is the problem, not AD.

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#DRILL 3 — AD/LRAS (SUPPLY-SIDE POLICY)

What to draw:

• Y-axis: "Price level"
• X-axis: "Real output"
• LRAS₁: vertical at Y₁ (original)
• LRAS₂: vertical at Y₂ (new, to the right of LRAS₁)
• AD: downward sloping
• Original equilibrium: P₁/Y₁ with dotted lines
• New equilibrium: P₂ (slightly lower) / Y₂ with dotted lines

Key feature to label: Y₁ = original Yfe; Y₂ = new higher Yfe after supply-side improvement Arrow on LRAS showing rightward shift

What this diagram proves: Supply-side policies uniquely generate both higher output AND lower (or stable) price level — the only non-inflationary growth mechanism.

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#DRILL 4 — NEGATIVE OUTPUT GAP

What to draw:

• Y-axis: "Price level"
• X-axis: "Real output"
• LRAS: vertical at Yfe
• AD: downward sloping, intersecting LRAS below Yfe
• Ye: actual equilibrium output (where AD meets SRAS) — LESS THAN Yfe
• Yfe: full employment output level on X-axis
• Label both Ye and Yfe on X-axis
• Double-headed arrow between Ye and Yfe labelled "Negative output gap"

Common error: Drawing Ye to the RIGHT of Yfe — this would be a positive output gap (inflationary). Negative output gap = Ye LEFT of Yfe (actual < potential = spare capacity).

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#DRILL 5 — SHORT-RUN PHILLIPS CURVE (SRPC)

AXIS LABELS CHANGE FOR THIS DIAGRAM:

• Y-axis: "Inflation rate (%)" — NOT "Price level"
• X-axis: "Unemployment rate (%)" — NOT "Real output"

What to draw:

• SRPC: downward sloping curve from top-left to bottom-right
• Label "SRPC" on the curve
• Mark NAIRU on X-axis (vertical dotted line)
• Mark two points on the SRPC:
  • Point A: lower unemployment, higher inflation (tight labour market)
  • Point B: higher unemployment, lower inflation (loose labour market)
• Arrow showing movement ALONG the SRPC from B to A (expansionary policy effect)

LRPC (if required):

• Vertical line at NAIRU — labelled "LRPC"
• This represents the long-run equilibrium where there is no permanent trade-off

Common errors:

1. Using "Price level" instead of "Inflation rate (%)" on Y-axis — K mark lost
2. Using "Real output" instead of "Unemployment rate (%)" on X-axis — K mark lost
3. Drawing SRPC as upward sloping — fundamental error
4. Confusing movement ALONG the SRPC (demand changes) with SHIFT of SRPC (supply shock or expectations)

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#DRILL 6 — J-CURVE

AXIS LABELS:

• Y-axis: "Current account balance" (can show deficit below zero line)
• X-axis: "Time"

What to draw:

• Horizontal zero line
• Starting point: current account at some level above/below zero
• Initial dip: current account worsens immediately after depreciation (the "J" shape descends)
• Then recovery: current account improves over time as volumes adjust (the "J" shape rises above starting point)
• Label: "Depreciation occurs" at the point the curve starts to dip
• Label: "Short run" (the descending section), "Long run" (the ascending section)

Why the J-curve has this shape (must know for essay reference): Short run: import VOLUMES don't change (pre-existing contracts), but import COSTS rise in domestic currency → import bill rises → CA worsens. Long run: import volumes fall as price-elastic buyers switch; export volumes rise as foreign buyers respond to cheaper exports → CA improves.

The Marshall-Lerner condition: Long-run CA improvement occurs only if PED(exports) + PED(imports) > 1.

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#DRILL 7 — PPF (PRODUCTION POSSIBILITY FRONTIER)

AXIS LABELS:

• Y-axis: "Good B" (or whichever two goods are specified)
• X-axis: "Good A"

What to draw:

• PPF₁: downward sloping concave curve (bowed outward from origin)
• PPF₂: further from origin (outward shift = potential growth / LRAS shift)
• Point ON PPF₁: productively efficient (all resources used)
• Point INSIDE PPF₁: productively inefficient (spare capacity / unemployment)
• Point ON PPF₂ (outside PPF₁): only achievable after supply-side improvement

Common use: To illustrate that actual growth (moving toward PPF₁) and potential growth (PPF shifting outward) are different — and supply-side policy achieves both simultaneously.

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#DRILL 8 — CIRCULAR FLOW OF INCOME

What to draw:

• Two boxes: "Households" and "Firms"
• Clockwise flow: Households → Firms (expenditure) → Households (income)
• Injections arrow entering the flow (labelled: I + G + X)
• Withdrawals/Leakages arrow leaving the flow (labelled: S + T + M)
• Label: Injections = I (investment) + G (government expenditure) + X (exports)
• Label: Withdrawals = S (savings) + T (taxation) + M (imports)

Key relationship: Equilibrium national income when Injections = Withdrawals (I+G+X = S+T+M)

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#RAPID EXAM-DAY CHECKLIST — BEFORE EVERY DIAGRAM

□ Y-axis: "Price level" (or "Inflation rate %" for SRPC)?
□ X-axis: "Real output" or "Real GDP" (or "Unemployment rate %" for SRPC)?
□ All curves labelled correctly (AD, SRAS, LRAS, SRPC)?
□ Shift direction correct?
□ Original equilibrium: dot + dotted lines to BOTH axes + P₁ and Y₁?
□ New equilibrium: dot + dotted lines to BOTH axes + P₂ and Y₂?
□ Arrow showing shift direction on the curve?
□ ZERO written text accompanying the diagram (on Draw questions)?

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VERIDIAN V6 Economics | N13 Diagram Drill | Pearson Edexcel IAL Unit 2