A-LevelEconomicsGovernment macroeconomic intervention9708/12 · Oct/Nov 2023 · Q291 Mark

A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country's aggregate demand (AD) curve. Which starting position for the aggregate demand curve would make this policy least effective?

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AAD1

BAD2

CAD3

DAD4

✓ Correct answer

A: AD1

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Topic: Government macroeconomic intervention, A-Level Economics (syllabus 9708). Multiple choice, 1 mark.
Source: A-Level Economics, Oct/Nov 2023 Paper 1 Variant 2, question 29.

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A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country's aggregate demand (AD) curve. Which starting position for the aggregate demand curve would make this policy least effective?

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