A-LevelEconomicsGovernment macroeconomic intervention9708/22 · Oct/Nov 2024 · Q520 Marks

OR

(a)With the help of examples, explain the difference between the marginal rate of taxation and the average rate of taxation and consider whether a government should decide to increase the rate of indirect tax to raise additional revenue.[8]
(b)Assess whether the achievement of a balanced budget should always be a main government macroeconomic objective.[12]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

[AO1 1] Accurate knowledge of Marginal Rate of Taxation (MRT) – proportion of extra income taken in tax.
[AO1 1] Accurate knowledge of Average Rate of Taxation (ART) – proportion of whole income taxed.
[AO1 1] Accurate numerical/graphical example for MRT and ART.
[AO2 1] Discussion of advantages of indirect taxes for revenue (easier/quicker to implement, less easy to avoid).
[AO2 1] Discussion of disadvantages of indirect taxes (regressive, higher MRT for poorer households, PED dependency, cost-push inflation).
[AO2 Max 2] Note: maximum of 2 marks if only advantages or disadvantages are considered.
[AO3 1] Assessment of strengths and weaknesses of indirect taxes for additional government revenue.
[AO3 1] Valid conclusion.

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