The table below shows selected fiscal and economic data for an economy over a three-year period:
| Year | Government Expenditure ($bn) | Tax Revenues ($bn) | Real GDP Growth Rate |
|---|---|---|---|
| Year 1 | 450 | 410 | +2.8% |
| Year 2 | 490 | 420 | +1.2% |
| Year 3 | 530 | 430 | -1.5% |
Based on the trends shown in the table, which of the following is the most likely macroeconomic consequence of this country's public sector financial position?
A decrease in the yields of newly issued government bonds, lowering the cost of servicing the national debt.
An increase in the financial crowding out of private sector investment as the government competes for loanable funds.
An upgrade to the country's sovereign credit rating due to the stimulatory effect of the fiscal deficit.
A sustained appreciation of the domestic currency's exchange rate driven by rising public sector demand.
44 exam-style questions on Edexcel A A Level Economics 4.5.3 Public sector finances. Each one has a worked solution and a mark scheme showing where the marks go.