1.

(a) Explain how an increase in the level of taxation can influence the level of aggregate
demand in an economy. [10]
(b) Evaluate the effectiveness of fiscal policy in promoting economic activity during a recession.
[15]
2. (a) Using the Keynesian AD/AS diagram, explain why an economy may be in equilibrium at
any level of real output. [10]
(b) Evaluate the view that increased investment is the most important factor in achieving a faster
rate of economic growth. [15]
3. (a) Explain the impact of automatic stabilizers on an economy. [10]
(b) Evaluate the effectiveness of fiscal policy in achieving economic growth. [15]
4. (a) Using the Keynesian AD/AS diagram, explain why an economy may be in equilibrium at
any level of real output. [10]
(b) Evaluate the view that increased investment is the most important factor in achieving a faster
rate of economic growth.
5. (a) Explain how expansionary monetary policy might lead to a rise in inflation. [10]
(b) Discuss the view that the most significant impact of high inflation in a country is a loss of
export competitiveness. [15]
6. (a) Explain what effect an increase in interest rates might have on unemployment. [10]
(b) Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment. [15]
7.(a) Explain the impact that a fall in the world price of oil might have on aggregate supply and
gross domestic product (GDP) in an economy. [10]
(b) Evaluate the view that economic growth is best achieved through improvements in
technology. [15] 4. (a) Explain why a high rate of inflation may negatively affect both a country’s
export competitiveness and the level of capital investment by firms. [10]
(b) Discuss the view that the use of monetary policy is always the best way to reduce inflation.
[15]
8(a) Explain how equilibrium interest rates are determined in an economy. [10]
(b) Discuss whether an increase in interest rates is the most effective way of reducing the rate
of inflation in an economy. [15]
9. (a) Explain the cause of cyclical (demand-deficient) unemployment. [10]
(b) Discuss the view that the most significant consequence of unemployment is the loss of tax
revenue for the government. [15]
10.(a) Explain the possible impact of an increase in wealth and consumer confidence on
aggregate demand. [10]
(b) Examine why, in contrast to the monetarist/new classical model, the economy will not
automatically return to the full employment level of output in the Keynesian model. [15]
11. (a) Explain how expansionary fiscal policy could be used to close a deflationary
(recessionary) gap. [10]
(b) Evaluate the view that fiscal policy is the most effective way of achieving long-term
economic growth. [15]
12.(a) Explain why structural unemployment might occur in an economy. [10]
(b) Evaluate government policies to deal with the different types of unemployment. [15]
13. (a) Explain how expansionary fiscal policy could be used to close a deflationary
(recessionary) gap. [10]
(b) Evaluate the view that fiscal policy is the most effective way of achieving long-term
economic growth. [15]