An economy is experiencing an inflationary output gap. The government decides to implement a discretionary contractionary fiscal policy to reduce aggregate demand and cool down economic activity. Which of the following combinations of measures represents this policy stance?
An increase in the personal income tax-free allowance combined with a reduction in corporation tax rates.
A reduction in the central bank’s policy interest rate combined with an expansion of its quantitative easing programme.
An increase in the rates of national insurance contributions combined with a reduction in government capital expenditure.
An increase in the statutory national minimum wage coupled with stricter regulation of the financial sector.
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.