An economy experiences a severe economic downturn leading to a widespread increase in redundancies. If robust automatic stabilisers are already functioning in this economy, what is the most likely outcome?
Aggregate demand will fall by more than it otherwise would have done
Aggregate demand will fall by less than it otherwise would have done
The government budget deficit will shrink automatically
Aggregate supply will increase to completely offset the fall in demand
68 exam-style questions on OCR A Level Economics Fiscal policy. Each one has a worked solution and a mark scheme showing where the marks go.