Public expenditure

In 2021, the US total GDP was $23 trillion and national debt was $28.4 trillion.

(Source: adapted from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US and https://fiscaldata.treasury.gov/national-debt/)

Calculate the US national debt in 2021 as a percentage of GDP.

Explain the relationship between a fiscal deficit and the national debt.

Which one of the following is the most likely consequence of an increase in the US national debt?

An increase in:

A number of business groups have signed an open letter to the UK Government asking it to commit to delivering the full High Speed 2 rail link. This will connect London to the northern cities of Manchester and Leeds at a cost of £56 billion and reduce journey times by as much as 50%.

(Source adapted from: https://www.theguardian.com/uk-news/2019/jun/22/business-heads-urge-next-pm-to-commit-to-finishing-hs2)

Explain one likely impact of this project on aggregate supply in the UK.

Government spending on the High Speed 2 rail link is an example of which of the following?

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:

With reference to Figure 1 and Extract A, explain what is meant by a ‘highly concentrated’ market for potato crisps (Extract A, lines 2–3).

Apart from changes in indirect taxes and subsidies, examine two causes of income inequality within a developed economy such as the UK.

In Extract A, lines 15–16, it was suggested that some firms may respond to the advertising ban by cutting the prices of their products.

Using game theory and the information provided in Figure 1 and Extract A, discuss the effects on firms of cutting prices in an oligopolistic market.

EITHER

Evaluate the microeconomic and macroeconomic effects of increased government spending on education to promote healthy eating in the UK.

Evaluate the likely microeconomic and macroeconomic effects of imposing a tax on HFSS foods .

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In 2016 the UK Chancellor of the Exchequer announced that the government would spend an extra £23 billion on innovation and infrastructure over the following five years.

Evaluate the likely economic effects of this planned increase in government expenditure.

With reference to Extract D (line 18), explain the meaning of the term ‘output gap’. Use an aggregate demand and aggregate supply diagram in your answer.

With reference to Figures 4 and 5 and your own knowledge, examine the relationship between the national debt as a proportion of GDP and the fiscal deficit.

Discuss the likely impact of the National Living Wage on the profitability of firms. Use a cost and revenue diagram in your answer.

EITHER

With reference to the information provided and your own knowledge, evaluate the likely microeconomic and macroeconomic influences on the UK’s international competitiveness.

With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic effects of a government policy of cutting public expenditure rather than raising taxes as a means of reducing a fiscal deficit.

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