In 2014 Brazil’s inflation rate was rising while its unemployment rate was falling. In that year, government spending rose by 16% whereas tax revenue dropped by 8%. Consequently, the country’s budget deficit got larger.
(a)[2]
What is meant by an inflation rate rising?
(b)[4]
Explain two causes of a fall in tax revenue.
(c)[6]
Analyse how a decline in unemployment may raise inflation.
(d)[8]
Discuss whether a government should spend more than it collects in taxation.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A rise in the general price level” …