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Question 1 – a . Using the IS-LM Model, explain ( give reasons make clear demonstrate understanding) how tax cuts may increase the level of AD in an economy in short run . 320 words.
b . Outline ( brief description include diagrams) and discuss ( extract different themes, describe evaluate, look at evidence for and against ) the income tax increases by UK coalition government following the recession. Relate explanation to 1a. Comment on their success. 380 words.
2 a Discuss ( extract different themes describe and evaluate, Assess with diagrams ) the effects of an increase in government expenditure, on output , employment and prices, in short run and medium run using AD – ASmodel
b – Brazil about to host football world cup in 2014, and summer Olympics in 2016. Explain how hosting the two events is likely to boost government expenditure. 200 words.
3 a Japan PM Abe advocates strong monetary stimulus. Explain ( give reasons make clear, demonstrate understanding ) how this is achieved . Using AS- AD model in combination with IS – LM Model, outline ( diagrams) how a monetary stimulus affects output, employment prices and interest rates in short run and medium run. 600 words
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