An economy is operating with a positive output gap, leading to rising demand-pull inflationary pressures. Which of the following actions represents a discretionary fiscal policy measure designed to return the economy to its long-run equilibrium?
A reduction in the standard rate of corporation tax to stimulate business investment.
A decision by the government to freeze public sector wages, reducing government consumption.
An increase in the central bank's base interest rate to raise the cost of borrowing.
A rise in total government spending on welfare benefits resulting from an increase in the unemployment rate.
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.