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2.5 Fiscal policy and supply-side policies

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Question 17

A government facing high domestic demand-pull inflation and a large budget deficit decides to implement a major fiscal consolidation program, consisting of substantial cuts in public investment and increases in personal income tax rates.

All other things being equal, which one of the following combinations, A, B, C or D, is most likely to occur in the short term?

CombinationRate of inflationRate of cyclical unemploymentDeficit on the current account of the balance of payments
ADecreasesDecreasesDecreases
BIncreasesIncreasesIncreases
CDecreasesIncreasesDecreases
DDecreasesIncreasesIncreases
A

Combination A

B

Combination B

C

Combination C

D

Combination D

Markscheme

2.5 Fiscal policy and supply-side policies Questions

  1. A Level
  2. /Economics
  3. /2.5 Fiscal policy and supply-side policies

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.

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