O-levels Economics, Macro Economics Past Papers

1. Macro Economic Questions
Taxation, Policies and Conflict of
Objectives

2. MJ 18/21
Analyse how fiscal policy measures could reduce
inflation.
• A rise in taxes (1) causes a fall in disposable
income/rise in costs (1) fall in government
spending (1) will reduce total (aggregate) demand
(1) reduce demand-pull inflation (1).
• Government spending on
education/training/subsidies (1) lower taxes (1)
could reduce costs of production (1) will increase
total (aggregate) supply (1) lower cost-push
inflation (1).
• Lower taxes on imports would reduce cost-push
inflation (1).
2

3. Reasons for the aim of low unemployment / high
employment
increase in incomes
• Increase in standards of living/quality of life
• Encourages economic growth/increase in GDP
• Reduces the amount of money spent on benefits and
releases this money for other types of spending (idea of
opportunity cost) such as health or education
• Brings in more revenue from taxation, both direct (from
the incomes earned) and indirect (from the extra
expenditure)
• helps reduce/eliminate a budget deficit
• reduces the extent of crime and social disorder
• encourages exports• and helps reduce/eliminate a
balance of payments deficit
Any bad effects of high employment??? 3

4. Consumers might benefit
from:
• increased choice
• increased incomes
• higher level of consumption
• increased leisure
• improvement in standard of
living
• possible lower prices.
Firms might benefit from:
• higher profits
• increased competition ,
greater efficiency
• increased demand for
products.
The government
might benefit from:
• increased tax
revenue
• money that could be
spent on better
health education
and training
facilities
4
Discuss how (i) consumers (ii) firms and (iii) the
government might benefit if there is economic
growth. [9]

5. Reasons why they conflict:
• high employment will increase income, this will increase spending, higher
spending will increase total (aggregate) spending, which may result in
demand-pull inflation.
• high employment may result in a shortage of workers, wages may be
pushed up, as
firms compete for workers/trade unions have greater power, causing cost-
push inflation/ wage-price spiral.
• high employment may increase demand for imports, which may result in
imported inflation.
• to reduce inflation/keep inflation low a government may seek to reduce
total (aggregate) demand, so may e.g. raise taxes/interest rates, the lower
demand will reduce output,causing cyclical unemployment
5
Discuss to what extent the aims of a low rate of inflation and a
high rate of employment are likely to conflict. [8]

6. • MJ 18/22. Discuss whether or not government
policy measures to reduce unemployment will
cause inflation. (8)
6
YES
Increased government
spending , expan fiscal
policy and expan monetary
policy (1)will increase total
(aggregate)
demand/spending (1)
This may reduce cyclical
unemployment / more
workers may be employed to
meet the higher demand (1)
but may cause demand-pull
inflation (1).
Higher demand may also
cause cost-push inflation (1)
as demand for workers rises
(1) firms may compete for
NO
An increase in demand may
not push up prices if
unemployment is initially
high firms will be able to
attract more workers by just
offering jobs they will not
have to raise wages.
The government may use
supply side policy measures
to reduce unemployment
e.g. improved
training/privatisation/deregu
lation such policy measures
may
reduce costs may increase
AS by as much as AD

7. May 2013(22)
5 Governments can use a range of different
policies to encourage economic growth.
(c) Discuss to what extent supply-side policies
are likely to be more effective than monetary
policies in stimulating economic growth. [10]

8. • Nov 2013(2)
• Discuss the extent to which a direct tax, such
as income tax, can affect the distribution of
income in an economy. [10]

9. MJ 2019/22
Discuss whether or not the imposition of import tariffs by a
country will reduce its unemployment.

10. MJ 19/21
Analyse how supply-side policy measures may
reduce unemployment. [6]

11. MJ 17
Discuss whether a government should increase
taxes on food. [8]

12. (d) Discuss whether an increase in spending on capital goods will
help to achieve the aims of government policies.

13. (d) Discuss whether an increase in spending
on capital goods will help to achieve the aims
of
government policies. CONTINUED