A-LevelEconomicsGovernment macroeconomic intervention9708/12 · May/June 2016 · Q201 Mark
An economy is initially in equilibrium at point X in the diagram. [Figure X.X] The government then introduces a supply-side policy measure which causes the economy to move to point Z. Which supply-side policy and reaction could explain this change?
This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.
Acut in income tax to increase the incentive to work but which results in workers increasing their leisure time
Bcut in unemployment benefit which results in more applications for training courses
Crise in government spending on education which increases labour productivity
Dprivatisation of key industries which results in an increase in economic efficiency
✓ Correct answer
A: cut in income tax to increase the incentive to work but which results in workers increasing their leisure time
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