The Netherlands has a very high Human Development Index (HDI) score and a high Gross Domestic Product (GDP). A recession in 2012 led consumer expenditure to decline. This created a gap between government spending and tax revenue. To eliminate the gap, the Netherlands’ Government reduced its spending. It might have used monetary policy to boost economic growth and increase tax revenue.
(a)[2]
Identify two influences on household spending levels.
(b)[4]
Explain why tax revenue might decline during a recession.
(c)[6]
Analyse how a reduction in government spending may lower a country’s HDI ranking.
(d)[8]
Discuss whether the use of monetary policy will raise economic growth.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “income or benefits” …