The government cuts income tax during a recession but households save most of the additional disposable income. What does this imply?
The policy must create a budget surplus
The increase in total spending and growth may be smaller than expected
Unemployment must immediately fall to zero
The tax cut becomes monetary policy
30 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.