The table below shows macroeconomic performance data for an imaginary economy over four consecutive quarters:
QuarterReal GDP Growth (%)Inflation Rate (%)Unemployment Rate (%)Current Account Balance (% of GDP)Q11.21.86.0+0.5Q24.54.24.2−2.5Q32.02.55.2−1.0Q4−1.05.57.5−3.5 \begin{array}{|c|c|c|c|c|} \hline \text{Quarter} & \text{Real GDP Growth (\%)} & \text{Inflation Rate (\%)} & \text{Unemployment Rate (\%)} & \text{Current Account Balance (\% of GDP)} \\ \hline \text{Q1} & 1.2 & 1.8 & 6.0 & +0.5 \\ \hline \text{Q2} & 4.5 & 4.2 & 4.2 & -2.5 \\ \hline \text{Q3} & 2.0 & 2.5 & 5.2 & -1.0 \\ \hline \text{Q4} & -1.0 & 5.5 & 7.5 & -3.5 \\ \hline \end{array} QuarterQ1Q2Q3Q4Real GDP Growth (%)1.24.52.0−1.0Inflation Rate (%)1.84.22.55.5Unemployment Rate (%)6.04.25.27.5Current Account Balance (% of GDP)+0.5−2.5−1.0−3.5Which one of the following transitions between quarters is most likely to demonstrate a short-run trade-off between different macroeconomic policy objectives?
The transition from Q1 to Q2, because the acceleration in real GDP growth and the reduction in the unemployment rate occurred alongside rising inflation and a deteriorating current account balance.
The transition from Q2 to Q3, because the successful reduction in the inflation rate occurred alongside a narrowing of the current account deficit.
The transition from Q3 to Q4, because the contraction in real GDP was accompanied by both rising unemployment and a higher rate of inflation.
The transition from Q1 to Q3, because the expansion of real GDP was achieved alongside a reduction in the unemployment rate.
327 exam-style questions on AQA A Level Economics 2.3 Economic performance, covering 2.3.1 Economic growth and the economic cycle, 2.3.2 Employment and unemployment, 2.3.3 Inflation and deflation, and 2.3.4 Possible conflicts between macroeconomic policy objectives. Each one has a worked solution and a mark scheme showing where the marks go.