Fiscal Policy and Supply-Side Policies | AQA A-Level Economics (7136)
Fiscal Policy and Supply-Side Policies
- 140 questions
- 9 subtopics
- Paper 2: The national and international economy, and available on Paper 3
- Paper 2 and Paper 3
Fiscal policy and supply-side policies is examined on Papers 2 and 3.
It covers what governments spend and tax, the deficit and debt that follow, and the policies aimed at the productive capacity of the economy rather than at demand.
Sample questions from Fiscal Policy and Supply-Side Policies
Answer each one closed book first, then open the answer.
-
Fiscal policy and aggregate demand
How does increased government spending affect aggregate demand under expansionary fiscal policy?
Show the answer
Increased government spending raises aggregate demand directly, as government expenditure is a component of AD. -
Types of tax
What is income tax in the UK?
Show the answer
Income tax is a main direct tax in the UK levied on earnings from employment and self-employment. -
The budget balance and the national debt
What is the national debt?
Show the answer
The national debt is the total accumulated stock of government borrowing over time. -
The purposes of public expenditure and taxation
What is capital expenditure in the context of public spending?
Show the answer
Investment in infrastructure and assets. -
The principles of taxation
Define a regressive tax.
Show the answer
A tax that takes a larger proportion of income from lower earners than from higher earners, so the average rate of tax falls as income rises. -
Budget deficits, surpluses and their effects
How might a budget deficit lead to higher aggregate demand in the short run?
Show the answer
Government spending exceeds revenue, injecting additional spending into the economy and boosting total demand. -
The national debt and fiscal rules
Why does it matter who holds the national debt?
Show the answer
Debt held domestically keeps interest payments within the economy, whereas debt held by foreign creditors represents an outflow of income. -
Supply-side policies and how they work
How can tax changes designed to alter personal incentives raise the economy's potential output?
Show the answer
By encouraging greater labour supply and increased work effort, thereby expanding the productive capacity of the economy.
The 9 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Fiscal policy and aggregate demand | Government spending and taxation as instruments, and how expansionary and contractionary policy work. | 13 |
| Types of tax | Direct and indirect taxes, progressive, proportional and regressive taxes, and the main UK taxes. | 19 |
| The budget balance and the national debt | Calculating the balance, why a government might run a deficit or surplus, and how debt accumulates. | 14 |
| The purposes of public expenditure and taxation | Correcting market failure, redistributing income, managing demand and promoting growth. | 14 |
| The principles of taxation | Horizontal and vertical equity, efficiency, convenience, certainty and economy. | 11 |
| Budget deficits, surpluses and their effects | Cyclical and structural deficits, and the effects of each on demand, interest rates and debt. | 12 |
| The national debt and fiscal rules | The debt-to-GDP ratio, why the interest rate and growth rate matter, who holds the debt, and the OBR. | 10 |
| Supply-side policies and how they work | How supply-side policy shifts LRAS, and its effect on growth, unemployment and inflation. | 25 |
| Market-based and interventionist supply-side policies | Tax cuts, deregulation, privatisation and union reform, set against infrastructure, education and industrial policy. | 22 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
-
Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
-
Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
-
Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
AQA A-Level Economics Active Recall Guide
Every topic, not just this one. 2,344 questions with their answers.