Economics · Oct / Nov 2020 · Paper 12 · Question 21

The table shows the rates of unemployment and real GDP growth for an economy in 2014 and 2018. | | 2014 | 2018 | |---|---|---| | rate of unemployment (%) | 3 | 10 | | rate of real GDP growth (%) | 4 | –2 | Which combination of policy measures would be most effective in returning the economy to the 2014 level of economic activity?

1. Aa decrease in direct taxes and an increase in the rate of interest
2. Ba decrease in government expenditure and an increase in the rate of interest
3. Can increase in direct taxes and a decrease in the rate of interest
4. Dan increase in government expenditure and a decrease in the rate of interest

As printed in the paper