EDEXCEL IAL Topical Past Paper Unit 2

2.6.4 Macroeconomic demand-side policies

section A

WEC13/01/May 2024

Between May 2022 and April 2023 the central bank of Nigeria increased the country’s base rate of interest by six percentage points.

Draw an AD and LRAS diagram to show the effect of this increase in the base rate of interest on consumption, the price level and real output. [4 marks]

WEC13/01/May 2024

Between 2015 and 2023 the European Central Bank increased its asset purchases (quantitative easing) programme by approximately €3.5 trillion.

With reference to the data, explain what is meant by quantitative easing. [4 marks]

WEC13/01/May 2024

In February 2023 government expenditure exceeded tax revenue by approximately $1 billion in Argentina.

Evaluate the likely macroeconomic effects of a government using deflationary policies to achieve a balanced budget. Refer to a country of your choice in your answer. [20 marks]