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9 marksFiscal Policy

CAPE Economics Unit 2 · 2006 · Paper 2 · Question 2(b)(i)

Using aggregate demand and aggregate supply curves to illustrate impacts in the short run.

Using aggregate demand and aggregate supply curves to illustrate your points, discuss the impacts on price level (P) and equilibrium GDP (Y) in the short run of a tax cut holding government purchases constant, with the economy operating at near full capacity.

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Other parts of this question

  1. 2(a)(i)Explain the meaning of Aggregate demand.[3 marks]
  2. 2(a)(ii)Explain the meaning of Aggregate demand curve.[3 marks]
  3. 2(a)(iii)Explain the meaning of Aggregate supply.[3 marks]
  4. 2(a)(iv)Explain the meaning of Aggregate supply curve.[3 marks]
  5. 2(a)(v)Explain the meaning of Equilibrium price level.[3 marks]
  6. 2(b)(ii)Using aggregate demand and aggregate supply curves to illustrate your points, discuss the impacts on price level (P) and equilibrium GDP (Y) in the short run…[9 marks]
  7. 2(b)(iii)Using aggregate demand and aggregate supply curves to illustrate your points, discuss the impacts on price level (P) and equilibrium GDP (Y) in the short run…[9 marks]
  8. 2(c)Explain how the variability of profits and expectations contribute to the instability of investment.[8 marks]

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