Economics (AS & A Level) · May / June 2026 · Paper 31 · Question 23

The diagram shows an economy's production possibility curve (PPC). [PPC diagram with axes 'output of capital goods' and 'output of consumer goods', points X and Y inside the curve] The government decreases income tax with the aim to increase employment without causing inflationary pressure in the economy. When is this policy likely to be most effective? | | marginal propensity to consume | position of the economy on the PPC diagram | |---|---|---| | A | 0.6 | X | | B | 0.6 | Y | | C | 0.8 | X | | D | 0.8 | Y |

1. A0.6, X
2. B0.6, Y
3. C0.8, X
4. D0.8, Y

As printed in the paper