Question 3
Extract 1: Mereton budget Mereton has low economic growth and uneven household incomes. The government proposes extra infrastructure spending financed partly by a higher tax on luxury goods.
| Government finances | Before policy | After policy forecast |
|---|---|---|
| Revenue | £760bn | £790bn |
| Spending | £790bn | £850bn |
| Infrastructure spending | £42bn | £78bn |
 |
a.[2]
Using Extract 1, calculate the forecast budget balance after the policy.
b.[2]
Explain why a tax on luxury goods is an indirect tax.
c.[6]
Analyse how additional infrastructure spending may increase economic growth.
d.i.[2]
State two purposes of government spending.
d.ii.[2]
Explain one opportunity cost of higher infrastructure spending.
d.iii.[6]
Evaluate whether Mereton should accept the larger budget deficit.
3.5 Fiscal policy Questions
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.