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2 marksFiscal Policy

CAPE Economics Unit 2 · 2011 · Paper 2 · Question 4(b)(i)

Explain how government borrowing on the domestic market to finance large fiscal deficits can affect domestic interest rates.

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Other parts of this question

  1. 4(a)Outline three methods that a government can use to finance its fiscal deficit.[6 marks]
  2. 4(b)(ii)Explain how government borrowing on the domestic market to finance large fiscal deficits can affect domestic investment.[2 marks]
  3. 4(b)(iii)Explain how government borrowing on the domestic market to finance large fiscal deficits can affect the country's exchange rate.[2 marks]
  4. 4(c)State two reasons why Caribbean residents often have a very high demand for the United States (US) dollar rather than their own domestic currency.[4 marks]
  5. 4(d)Identify three fiscal measures available to Caribbean countries to boost output in times of recession and evaluate the effectiveness of each fiscal measure.[9 marks]

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