Economics 2281 · O Level · The macroeconomic aims of government
The macroeconomic aims of government — practice question
In 2015, the UK economy saw output rise and unemployment remain relatively low. Even so, labour productivity and earnings increased only a little. The government was still spending more than it collected in tax revenue and was thinking about altering some of its monetary policy measures.
(a)[2]
Identify two reasons for inflation.
(b)[4]
Explain two reasons why government spending might exceed tax revenue.
(c)[6]
Analyse how rising labour productivity can raise living standards.
(d)[8]
Discuss whether monetary policy measures may increase economic growth.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “demand-pull inflation” …