An economy is operating above its full-employment level of output, leading to rising demand-pull inflationary pressures. Which of the following combinations of policy actions represents a purely contractionary fiscal policy response to this macroeconomic issue?
An increase in the standard rate of value added tax (VAT) accompanied by a reduction in government department budgets.
An increase in the central bank's base interest rate combined with a reduction in the rate of quantitative easing.
A reduction in the personal income tax allowance alongside an increase in state pension payments.
A reduction in the corporation tax rate coupled with a decrease in tariffs on imported raw materials.
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.