An economy is experiencing a significant negative output gap. The government decides to implement discretionary fiscal policy to stimulate aggregate demand (ADADAD). Which of the following measures is most appropriate to achieve this objective?
An automatic rise in government expenditure on unemployment benefits as unemployment increases.
A reduction in the main rate of corporation tax accompanied by a newly authorized program of public infrastructure investment.
A decision by the central bank to lower the policy interest rate and engage in quantitative easing.
An increase in the standard rate of value added tax (VAT) to raise tax revenues for public services.
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.