Question 1
The information in Table 1 refers to Country A (base year: 2011).
Table 1
Explain two reasons why fiscal policy may prove effective in lifting an economy out of a deep recession.
For a limited explanation of one reason, award a maximum of [1].
For an accurate explanation of one reason or a limited explanation of two reasons, award a maximum of [2].
For providing an accurate explanation of one reason and a limited explanation of a second reason, award a maximum of [3].
For providing two accurate reasons, award a maximum of [4].
Level
Marks
0
The work does not meet a standard described by the descriptors below.
1
The written response is limited.
1-2
Reasons may include:
- An increase in Government spending is direct or can target specific sectors.
- Spending by the government will often increase confidence levels.
- There may be a multiplier effect.
- Lowering income taxes increases disposable incomes.
Any other valid reason.
2
The written response is accurate.
3-4
Accurate explanations may include:
- An increase in Government spending (G) is direct since G is a component of aggregate demand or since infrastructure or subsidies can be targeted towards key areas.
- Spending by the government will often directly increase employment (or decrease unemployment) and thus confidence levels.
- There may be a multiplier effect as a rise in income leads to a rise in consumption.
- Lowering income taxes increases disposable incomes and thus may positively affect spending as well as confidence levels.
Any other valid and explained reason.