During an economic recession, a government's budget deficit automatically widens without any direct legislative intervention. Which of the following combinations of automatic fiscal policy changes best explains this occurrence?
Income tax revenue increases due to fiscal drag, while government expenditure on unemployment benefits falls.
Government expenditure on transfer payments increases, while tax revenues from direct and indirect taxes fall.
The central bank lowers interest rates, leading to increased consumer spending and higher VAT receipts.
The government initiates a new infrastructure spending programme funded by issuing government bonds.
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.