Before its Budget, a government forecasts that its revenue and its spending will both be £640 billion next year. The table shows the two measures it then announces in the Budget.
| Measure | Effect on next year's forecast |
|---|---|
| Raising the Personal Allowance for income tax | Income tax revenue falls by £12 billion |
| A hospital building programme | Government spending rises by £8 billion |
Which statement about the forecast after these measures is correct?
It shows a £4 billion deficit, and the measures are contractionary
It shows a £20 billion deficit, and the measures are contractionary
It shows a £20 billion deficit, and the measures are expansionary
It shows a £4 billion deficit, and the measures are expansionary
76 exam-style questions on OCR GCSE Economics 3.5 Fiscal policy, covering 3.5.1 Government spending and revenue, 3.5.2 Budget balance, surplus and deficit, 3.5.3 What is fiscal policy, 3.5.4 Calculate effects of taxes and spending, 3.5.5 Analyse effects of taxes and spending, 3.5.6 Costs and benefits of fiscal policy, and 3.5.7 Redistributing income and wealth. Each one has a worked solution and a mark scheme showing where the marks go.