An economy is experiencing a changing fiscal position. Which of the following combinations of events is most likely to lead to a reduction in the government's structural budget deficit alongside an increase in its cyclical budget deficit?
A permanent increase in the standard rate of value-added tax (VAT) during a period of slowing macroeconomic growth.
A permanent cut in corporation tax rates during an economic boom that pushes actual output above trend.
A temporary reduction in income tax rates during a recession, accompanied by a permanent increase in government infrastructure spending.
An automatic decline in welfare benefit expenditure during an economic recovery, accompanied by a permanent reduction in national insurance contribution rates.
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.