Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
A cut in income tax may: - ✔✔✔-increase the incentive to work (one mark).
raise the size of the labour force (one mark).
increase aggregate supply/productive capacity (one mark).
raise GDP (output)/long run economic growth/result in
sustained economic growth (one mark).
increase quality of output (one mark).
Ccomment on whether a higher level of investment always results in a higher economic growth
rate - ✔✔✔-One mark for data does not generally support the view.
One mark for the country, Venezuela, with the highest investment as a percentage of GDP had
the lowest growth (actually negative growth).
One mark for the country with the lowest investment, Brazil, had the second highest growth
rate.
One mark for any other relevant supporting comparison e.g.
Chile had a higher investment (as a %) than Mexico but a lower
economic growth rate
or
Mexico had higher investment (as a %) than Argentina but a lower
economic growth rate.
,Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
One mark for investment increases AD/may cause actual growth.
One mark for investment increases AS/causes potential economic
growth
Up to three marks for evaluation.
data does not show the actual value of investment.
only a small number of countries shown.
only one year is shown.
economic growth rate is influenced by other factors
GDP data could be nominal not real
there may be a time lag between changes in investment and
economic growth
Comment on the economic effects of low unemployment - ✔✔✔-High output
•
high tax revenue
•
low government spending on benefits
,Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
•
poverty trap
•
increased consumer confidence
Up to 2 marks for explaining an effect/effects e.g. higher tax revenue because
more people in work and spending more, higher tax revenue can increase
spending on education and health care.
Up to 4 marks for evaluating effects, eg will depend on:
•
how low unemployment is
•
the length of time people are unemployed
•
the type of unemployment
•
there can be advantages and disadvantages e.g. demand -pull inflation
Comment on the effect that an increase in a country's exports will have on its level of
employment. - ✔✔✔-exports are a component of aggregate demand./injection
into the circular flow
an increase in exports will raise aggregate demand.
higher aggregate demand will encourage firms to
expand output.
, Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
to raise production, firms may employ more
workers/increases employment.
Up to 3 marks for evaluating effects eg:
the impact on employment will depend on whether
exports rise by more than imports.
another component of aggregate demand may fall.
higher output could result from improved productivity or
capital investment and so employment may not rise.
if the economy is operating at full employment, it may
not be possible to increase employment.
final effect one employment may be greater than the
initial impact due to the multiplier effect.
Comment on the effectiveness of
one supply side policy in improving a country's current account position - ✔✔✔-1 mark for
identifying a measure eg government spending on education, privatisation, a cut in income tax,
subsidies.
Up to 3 marks for explaining how a supply side measure could
improve a country's current account position:
100% Solved
A cut in income tax may: - ✔✔✔-increase the incentive to work (one mark).
raise the size of the labour force (one mark).
increase aggregate supply/productive capacity (one mark).
raise GDP (output)/long run economic growth/result in
sustained economic growth (one mark).
increase quality of output (one mark).
Ccomment on whether a higher level of investment always results in a higher economic growth
rate - ✔✔✔-One mark for data does not generally support the view.
One mark for the country, Venezuela, with the highest investment as a percentage of GDP had
the lowest growth (actually negative growth).
One mark for the country with the lowest investment, Brazil, had the second highest growth
rate.
One mark for any other relevant supporting comparison e.g.
Chile had a higher investment (as a %) than Mexico but a lower
economic growth rate
or
Mexico had higher investment (as a %) than Argentina but a lower
economic growth rate.
,Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
One mark for investment increases AD/may cause actual growth.
One mark for investment increases AS/causes potential economic
growth
Up to three marks for evaluation.
data does not show the actual value of investment.
only a small number of countries shown.
only one year is shown.
economic growth rate is influenced by other factors
GDP data could be nominal not real
there may be a time lag between changes in investment and
economic growth
Comment on the economic effects of low unemployment - ✔✔✔-High output
•
high tax revenue
•
low government spending on benefits
,Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
•
poverty trap
•
increased consumer confidence
Up to 2 marks for explaining an effect/effects e.g. higher tax revenue because
more people in work and spending more, higher tax revenue can increase
spending on education and health care.
Up to 4 marks for evaluating effects, eg will depend on:
•
how low unemployment is
•
the length of time people are unemployed
•
the type of unemployment
•
there can be advantages and disadvantages e.g. demand -pull inflation
Comment on the effect that an increase in a country's exports will have on its level of
employment. - ✔✔✔-exports are a component of aggregate demand./injection
into the circular flow
an increase in exports will raise aggregate demand.
higher aggregate demand will encourage firms to
expand output.
, Hard Macroeconomics Exam with Questions and Answers (2026 – Updated) –
100% Solved
to raise production, firms may employ more
workers/increases employment.
Up to 3 marks for evaluating effects eg:
the impact on employment will depend on whether
exports rise by more than imports.
another component of aggregate demand may fall.
higher output could result from improved productivity or
capital investment and so employment may not rise.
if the economy is operating at full employment, it may
not be possible to increase employment.
final effect one employment may be greater than the
initial impact due to the multiplier effect.
Comment on the effectiveness of
one supply side policy in improving a country's current account position - ✔✔✔-1 mark for
identifying a measure eg government spending on education, privatisation, a cut in income tax,
subsidies.
Up to 3 marks for explaining how a supply side measure could
improve a country's current account position:
