Fiscal policy

UK inflation, as measured by the CPI, rose to 10.1% in the 12 months to July 2022, compared to 2.0% in the 12 months to July 2021.

(Source: adapted from https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/ consumerpriceinflation/july2022)

Evaluate macroeconomic policies, apart from monetary policy, the UK government could use to reduce inflation.

Write your answer here:

The trade cycle

At point Z on the diagram, which one of the following is likely to occur?

An increase in:

With reference to the graph, explain the difference between automatic stabilisers and discretionary fiscal policy.

Explain one reason why a country such as Germany wants to avoid an increase in the national debt relative to GDP (Figure 2).

Examine two likely effects of the forecast change in the rate of unemployment between 2019 to 2020, on firms in Germany. Refer to Figure 4 in your answer.

Discuss the likely impact of investment in new technology on the profitability of firms in Germany, as described in Extract C line 20. Use a cost and revenue diagram to support your answer.

EITHER

Evaluate the microeconomic and macroeconomic factors which are likely to determine the level of economic growth in Germany relative to other developed economies.

Evaluate the microeconomic and macroeconomic impacts of ‘a much more expansionary fiscal policy’ (Extract C line 23) on the German economy.

Write your answer here:

The UK has experienced a budget deficit since 2001. The government aimed to reach a budget surplus by 2019, but in 2016 this target was abandoned.

(Source: adapted from https://www.gov.uk/government/news/autumn-statement-2016-some-of-the-things-weve-announced)

Explain one likely reason why the 2019 budget surplus target was abandoned.

Explain the likely impact of abandoning the budget surplus target on the UK national debt.

If a government takes decisions to target a budget surplus, this is an example of:

With reference to Figure 1, calculate the percentage change in the value of the euro in pounds from the start of 2009 to the start of 2015.

With reference to the information provided and your own knowledge, examine two factors which might explain the change in the rate of Eurozone inflation as shown in Figure 2.

Since mid-2015 the euro has appreciated. Assess the likely impact of an appreciation of the euro on the current account of the balance of payments for Eurozone countries.

Discuss the likely success of the ECB’s quantitative easing programme in moving Eurozone inflation closer to ‘the central bank’s ceiling of 2%’ (Extract A, line 17).

Discuss ‘looser fiscal policy’ and ‘supply-side reforms’ (Extract A, lines 20 and 21) that may be used by governments of Eurozone countries to increase economic growth.