CAIE A-Level Economics 10.3.3 Macroeconomic Government Failure

Practise assessing macroeconomic government failure by comparing intended objectives with unintended output, efficiency or migration effects and testing causal evidence.

Exam points

identify government failure when policy costs or unintended effects exceed the intended macro benefit
use article evidence to separate government-caused outcomes from external shocks and weak attribution
apply tax-induced skilled emigration as an efficiency loss that undermines the original objective

[Maximum number: 1]

A government wishes to increase economic efficiency in the country. It raises the rate of income tax which leads to the emigration of high-earning skilled workers that the country needs.

How would this outcome be described?

government
failure

market failure

negative
externality

yes

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10.3.3—Macroeconomic government failure question 1