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Economic Growth and/or Economic Development Strategies · Paper 1 — Free Economics SL Practice Questions
1MasterySAQ-SPolicies for promoting economic growth4 marksPaper 1~6 min
Country X is a developed nation currently experiencing a recessionary gap. The government announces an increase in spending on infrastructure projects as part of an expansionary fiscal policy.
(a)
Using a fully labelled AD/AS , show the effect of this policy on the equilibrium level of real GDP and the price level in Country X. [2 marks]
(b)
Using your , explain why the increase in real GDP may be less than the full multiplier effect predicts. [2 marks]
Solutions
2MasterySAQ-SPolicies for promoting economic growth4 marksPaper 1~6 min
Country Z is a developing nation with a large informal sector and high unemployment. The government is considering reducing corporate income tax rates a supply-side policy to promote long-run economic growth.
(a)
Define the term "productive capacity." [1 mark]
(b)
Using an aggregate demand–aggregate supply (AD/AS) , analyse how a reduction in corporate income tax could increase the long-run productive capacity of Country Z. [3 marks]
Solutions
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