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3 marksFiscal Policy

CAPE Economics Unit 2 · 2009 · Paper 2 · Question 4(a)(i)

Fiscal policy and government budget.

Define balanced budget multiplier.

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Other parts of this question

  1. 4(a)(ii)Define fiscal policy.[2 marks]
  2. 4(a)(iii)Define balanced budget.[2 marks]
  3. 4(a)(iv)Define unbalanced budget.[2 marks]
  4. 4(b)Explain how an 'equal' or 'balanced' change in government spending and tax revenues may cause income to rise.[5 marks]
  5. 4(c)(i)Discuss how government's borrowing to finance fiscal deficits can have a negative impact on domestic interest rates.[5 marks]
  6. 4(c)(ii)Discuss how government's borrowing to finance fiscal deficits can have a negative impact on domestic investment.[5 marks]
  7. 4(c)(iii)Discuss how government's borrowing to finance fiscal deficits can have a negative impact on inflation.[5 marks]
  8. 4(c)(iv)Discuss how government's borrowing to finance fiscal deficits can have a negative impact on the value of the country's currency in relation to the United…[5 marks]
  9. 4(d)Explain, using a graph, the relationship between investment and the rate of interest. Show on the graph how expansionary fiscal policy can have a negative…[10 marks]
  10. 4(e)Explain what is meant by the 'national debt' of a country and state ONE reason why the national debt is a burden to a country.[6 marks]

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