An economy is operating with a significant negative output gap. The government decides to implement a discretionary expansionary fiscal policy to stimulate aggregate demand (ADADAD) and close this gap.
Which combination of policy measures represents a discretionary expansionary fiscal policy?
OptionPersonal Tax AllowanceGovernment Capital SpendingValue Added Tax (VAT) RateADecreasedIncreasedIncreasedBIncreasedDecreasedDecreasedCIncreasedIncreasedDecreasedDDecreasedDecreasedIncreased \begin{array}{|c|c|c|c|} \hline \text{Option} & \text{Personal Tax Allowance} & \text{Government Capital Spending} & \text{Value Added Tax (VAT) Rate} \\ \hline \text{A} & \text{Decreased} & \text{Increased} & \text{Increased} \\ \hline \text{B} & \text{Increased} & \text{Decreased} & \text{Decreased} \\ \hline \text{C} & \text{Increased} & \text{Increased} & \text{Decreased} \\ \hline \text{D} & \text{Decreased} & \text{Decreased} & \text{Increased} \\ \hline \end{array} OptionABCDPersonal Tax AllowanceDecreasedIncreasedIncreasedDecreasedGovernment Capital SpendingIncreasedDecreasedIncreasedDecreasedValue Added Tax (VAT) RateIncreasedDecreasedDecreasedIncreasedPersonal tax allowance: Decreased; Government capital spending: Increased; VAT rate: Increased
Personal tax allowance: Increased; Government capital spending: Decreased; VAT rate: Decreased
Personal tax allowance: Increased; Government capital spending: Increased; VAT rate: Decreased
Personal tax allowance: Decreased; Government capital spending: Decreased; VAT rate: Increased
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.