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CAIE A-Level Economics 5.1.1 Macroeconomic Policy Objectives

Practise identifying price stability, low unemployment and economic growth as macroeconomic objectives and selecting fiscal or monetary responses to relevant data.

Syllabus
2026–2028
Course
Economics 9708
Level
AS

Exam points

  • distinguish stable prices, low unemployment and real growth from distributional or micro aims
  • match contractionary policy to excessive inflation and expansionary policy to deflation or joblessness
  • evaluate an inflation target through expectations, credibility, flexibility and possible output costs

5.1.1—Macroeconomic policy objectives question 1

[Maximum number: 1]

Sweden had a change in its Consumer Prices Index (CPI) of -0.6 %.
Which combination of policies might its government use to restore price stability?

A

increase interest rates and increase indirect taxes

B

increase interest rates and reduce government spending

C

reduce government spending and increase income tax

D

reduce interest rates and increase government spending

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