Document page
Economics IGCSEPDF 86
118 pagesrevision 46932
PDF 86
Page image rendered from the stored file at 110 dpi; it sharpens as you zoom. Outlines are placed from each region’s stored position on the page (612 × 792 pt).
readable
Source of this text: embedded text layer. The better of the embedded text and OCR is kept.
Solved Answers (Note Form)
Unsolved Past Paper Questions
Question 3.1 (4 Marks)
Explain two
Question 3.2 (6 Marks)
Analyse how a significant increase in
unemployment.
Question 3.3 (8 Marks)
Discuss the potential economic consequences of a country running a
budget deficit.
Government Spending (G)
large and persistent
public
●
●
●
●
●
reasonswhy a government imposes taxation.
might be used to reduce
● Reason 1: To Raise Revenue:
○ K: The primary reason is to finance massive public sector expenditure on
and merit goods (e.g., healthcare, education, defence) and welfare benefits.
● Reason 2: To Influence Behaviour:
○ K: Governments use taxes to discourage the consumption of demerit goods
(e.g., high tax on tobacco) or activities that cause negative externalities (e.g.,
carbon taxes).
K: Increasing G is an expansionary fiscal policy aimed at boosting Aggregate Demand
(AD).
A: Spending on infrastructure projects (e.g., road building) immediately creates jobs
for construction workers and related industries.
An: This increase in employment and wages leads to further consumption through the
multiplier effect, raising AD across the economy.
An: Firms across the economy respond to higher AD by increasing their own output and
hiring more labour, reducing cyclical unemployment.
E: This method is highly targeted and can quickly stimulate job creation during a
recession.
Q3.1: Reasons for Taxation (4 Marks)
Q3.2: G Used to Reduce Unemployment (6 Marks)