Economic forecasters predict that the positive output gap in Canada is likely to widen over the next fiscal year, leading to severe demand-pull inflationary pressures.
In the short run, which one of the following policy developments is most likely to help prevent this positive output gap from increasing?
The central bank lowering its main policy interest rate to stimulate commercial bank lending
An increase in direct taxation rates accompanied by a reduction in the government's budget deficit
A discretionary increase in government capital expenditure funded by increased public sector borrowing
Supply-side deregulation of the domestic labour market to lower the natural rate of unemployment
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.