Inflation is high. The government increases VAT and cancels planned purchases of office equipment for public services. What is a likely macroeconomic effect?
Slower output growth and higher unemployment
Higher interest rates set by the government
Higher household consumption as retail prices fall
A wider budget deficit and more government borrowing
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.