An economy is experiencing overheating, with demand-pull inflation rising to 7.2% and a widening fiscal deficit. Which of the following combinations of discretionary fiscal policy measures, A, B, C or D, is most likely to both curb inflation and improve the government's fiscal balance?
| Government capital expenditure | Transfer payments | Direct tax rates | |
|---|---|---|---|
| A | Decrease | Increase | Decrease |
| B | Decrease | Decrease | Increase |
| C | Increase | Decrease | Decrease |
| D | Increase | Increase | Increase |
A
B
C
D
245 exam-style questions on AQA A Level Economics 2.5 Fiscal policy and supply-side policies, covering 2.5.1 Fiscal policy and 2.5.2 Supply-side policies. Each one has a worked solution and a mark scheme showing where the marks go.