A-LevelEconomicsGovernment macroeconomic intervention9708/12 · May/June 2020 · Q241 Mark
The diagram shows an economy at full employment equilibrium. [Figure 24.1] Which short-run measures should the government take to maintain the economy's current equilibrium if there is an unexpected balance of trade surplus?
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Ahigher government spending on education financed by an equal rise in direct taxation
Bhigher direct taxation with government spending unchanged to create a budget surplus
Chigher spending on infrastructure financed by a budget deficit
Dlower interest rates to promote investment spending in the private sector
✓ Correct answer
B: higher direct taxation with government spending unchanged to create a budget surplus
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