Economic Growth and/or Economic Development Strategies · Paper 2 — Free Economics SL Practice Questions

Country X is a developed nation. In 2023, its inflation rate was $2\%$ and its unemployment rate was $5\%$. The government implemented a combination of expansionary fiscal and monetary policies to stimulate economic growth. The fiscal policy involved an increase in government spending on infrastructure of USD 50 billion, funded by borrowing. The monetary policy involved a reduction in the central bank's policy interest rate from $3\%$ to $1.5\%$.

Country Y is a developing nation with an unemployment rate of $12\%$ and an inflation rate of $1\%$. Its government is considering two supply-side policies to promote long-term economic growth: - Policy 1: Reducing corporate income tax from $30\%$ to $20\%$ - Policy 2: Deregulating the labour market by reducing the minimum wage and making it easier for firms to hire and fire workers

Country X is a developing economy in South-East Asia with an average real GDP growth rate of $2.5\%$ per year over the last decade, an unemployment rate of $7.5\%$, and annual inflation rate of $1.8\%$. The government is considering two alternative strategies to boost economic growth: - Strategy A: A significant increase in government spending on infrastructure (roads, ports, and digital networks), financed by borrowing from domestic financial markets. - Strategy B: A reduction in the central bank's policy interest rate from $4.5\%$ to $2.5\%$, combined with a decrease in the reserve requirement for commercial banks.