Following an intense sovereign debt crisis, a newly elected coalition government in a medium-sized European economy has committed to a stringent fiscal consolidation programme. The fiscal mandate requires the government to eliminate its structural deficit within four years, specifying that at least 70% of this consolidation must be achieved through increases in direct and indirect taxation rather than reductions in public spending.
Evaluate the view that implementing fiscal deficit reduction primarily through tax increases, rather than public spending cuts, is highly damaging to an economy's long-run productive capacity and overall economic growth.
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.