Economics (AS & A Level) · May / June 2026 · Paper 14 · Question 20

The diagram shows an economy at full employment equilibrium. Which short-run measures should the government take to maintain the economy's current equilibrium if there is an unexpected balance of trade surplus?

1. Ahigher government spending on education financed by an equal rise in direct taxation
2. Bhigher direct taxation with government spending unchanged to create a budget surplus
3. Chigher spending on infrastructure financed by a budget deficit
4. Dlower interest rates to promote investment spending in the private sector

As printed in the paper