Equilibrium national output

(a) With reference to Figure 1, explain the distinction between direct and indirect taxation.

(b) With reference to Extract A, examine two factors influencing the short‑run aggregate supply of the German economy.

(c) With reference to the information provided and your own knowledge, assess the likely macroeconomic effects of the German government’s budget deficit.

(d) With reference to Extract B, discuss the impact of the planned investment by Intel in a new semiconductor factory on Germany’s aggregate demand. Use an aggregate demand and aggregate supply diagram in your answer.

(e) Discuss supply‑side policies the German government could use ‘to improve its economic performance’ (Extract A, line 6).

With reference to Figure 1, explain the distinction between direct and indirect taxation.

With reference to Extract A, examine two factors influencing the short‑run aggregate supply of the German economy.

With reference to the information provided and your own knowledge, assess the likely macroeconomic effects of the German government’s budget deficit.

With reference to Extract B, discuss the impact of the planned investment by Intel in a new semiconductor factory on Germany’s aggregate demand. Use an aggregate demand and aggregate supply diagram in your answer.

Discuss supply‑side policies the German government could use ‘to improve its economic performance’ (Extract A, line 6).

In September 2022 the Bank of England increased the base interest rate from 1.75% to 2.25%.

(Source: adapted from https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp)

Draw an aggregate demand and aggregate supply diagram to illustrate the likely impact of an increase in the UK base interest rate on the average price level and real output.

Which one of the following is the most likely impact of an increase in the base interest rate?

A decrease in the:

The Hong Kong‑Zhuhai‑Macau Bridge is the world’s longest sea bridge. It reduces the journey time from Hong Kong to Zhuhai from 4 hours to just 30 minutes. It cost the equivalent of $18.8 billion and was government funded.

(Source adapted from: www.theguardian.com)

Draw an aggregate demand and aggregate supply diagram to show the likely impact of this new bridge on the price level and real output in the region.

Which one of the following would be most likely to solve a negative output gap problem in a domestic economy?

An increase in

The International Monetary Fund has called on the G20 group of large industrialised countries to boost government spending on infrastructure.

(Source: https://www.theguardian.com/business/2016/jul/23/ imf-calls-for-more-government-spending-as-rate-cuts-lose-their-impact)

Draw an aggregate demand and aggregate supply diagram to show the likely impact of an increase in government spending on infrastructure on a country’s price level and real output.

Which one of the following would be an example of government spending on infrastructure?

An increase in:

Which one of the following would be most likely to cause aggregate demand to increase?

A fall in:

Draw an aggregate demand and aggregate supply diagram illustrating the likely impact of a rise in interest rates on the price level and real output.