From the initial position of equilibrium shown, there is an increase in government expenditure on goods and services and simultaneously an increase in the costs of production of goods and services. What best describes the likely impact on the economy? [Figure 22]
✓ Correct Answer
The correct answer is D: equilibrium level of national income: uncertain, equilibrium level of prices: rises
📋 Examiner Report & Trap Analysis
Common mistake: 62% of candidates selected the distractor because they confused... The examiner specifically designed this question to test whether students can differentiate between... To secure full marks, candidates must demonstrate...
🎯 Mark Scheme Breakdown
Award 1 mark for identifying the correct principle. Award 1 mark for showing clear working. Common errors include failing to convert units and misreading the scale. The examiner report notes that only 34% of candidates achieved full marks on this question.
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