(a)[2]
Define the term subsidy.
(b)[4]
Explain two negative effects of inflation.
(c)[6]
Analyse how higher government spending may lead to inflation.
(d)[8]
Discuss whether raising the highest rate of income tax will benefit an economy or not.
Economics 0455 · IGCSE · Fiscal policy
Fiscal policy — practice question
In March 2016, the Canadian government said it would raise government spending, including a larger subsidy for environmentally friendly technology. It also stated that the highest income-tax rate for high-income earners would rise from 29% to 33%. Changes in government spending and taxation affect a country’s inflation rate.
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