CIE A Level Topical Past Paper 2
10.3 Effectiveness of policy options to meet all macroeconomic objectives
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In 2022, many countries experienced a high rate of inflation caused by disruptions to the supply of goods and services arising from the Covid-19 pandemic and the conflict between Russia and Ukraine. In one country, the government cut taxes and the central bank raised interest rates.
Evaluate the likely impact of these policies on that government’s ability to control inflation. [20] [Sample answer]
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With the help of a diagram, assess the effectiveness of government policies which might be used to reduce cost-push inflation. [20]
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b) Discuss whether a government can achieve all its key macroeconomic aims simultaneously. [13]
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b) Discuss whether monetary policy alone is sufficient for a government to achieve its macroeconomic aims simultaneously. [13]
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b) ‘Economic growth will always decrease the level of unemployment but this will usually create significant problems in relation to attaining other key macroeconomic aims.’ How far do you agree with this statement? [13]
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a) Explain what is meant by quantitative easing (QE) and consider whether it is an effective policy to be used in a recession. [12]
b) ‘Policies to achieve economic growth will inevitably cause a government budget deficit.’ How far do you agree with this statement? [13]
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b) To what extent do you agree that it is not possible to solve a persistent balance of payments deficit without sacrificing other key macroeconomic aims? [13]
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b) Discuss whether fiscal policy alone can promote a more equal distribution of income. [13]