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CAIE A-Level Economics 10.3.2 Policy Problems and Conflicts

Practise tracing crowding out and conflicting policy effects when action on demand, inflation or external balance changes private investment, unemployment or another…

Syllabus
2026–2028
Course
Economics 9708
Level
A2

Exam points

  • explain crowding out when government borrowing raises interest rates or absorbs private finance
  • trace expansionary fiscal or monetary policy to deflation relief but greater import demand
  • evaluate temporary price control or mixed policy when inflation expectations conflict with market reform

10.3.2—Policy problems/conflicts question 1

[Maximum number: 1]

Increased borrowing by the government results in higher interest charges and this leads to less private investment expenditure.

Of what is this an example?

A

an automatic stabiliser

B

crowding out

C

the accelerator

D

the substitution effect

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