A-LevelEconomicsGovernment macroeconomic intervention9708/31 · May/June 2018 · Q261 Mark

In a Keynesian model, why would a $100 million increase in government expenditure on goods and services have a greater impact on aggregate demand than a $100 million reduction in tax revenue? A Consumers spend only part of any extra disposable income. B Government expenditure does not create wealth. C The marginal tax rate affects the value of the multiplier. D The multiplier does not apply to consumer expenditure.

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

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Topic: Government macroeconomic intervention, A-Level Economics (syllabus 9708). Structured question, 1 mark.
Source: A-Level Economics, May/June 2018 Paper 3 Variant 1, question 26.

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