AQA · Macroeconomics · Fiscal policy and supply-side policies

AQA Economics past paper questions: Fiscal policy and supply-side policies

Every AQA question on Fiscal policy and supply-side policies from 2016 to 2025: 12 essays, 37 data response questions and 54 multiple choice questions. It covers Fiscal policy & public finances, Supply-side policies, Inequality & poverty, Economic growth & cycle and Aggregate supply. Each question links to its paper, mark scheme and examiner report.

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SubtopicsFiscal policy & public finances 77Supply-side policies 32Inequality & poverty 9Economic growth & cycle 6Aggregate supply 5Macro objectives & conflicts 4Aggregate demand 2Inflation & deflation 2Unemployment 2Productivity & efficiency 1Labour demand & supply 1Money & banking 1Demand & supply 1Development 1Externalities 1Balance of payments 1

Essay questions on fiscal policy and supply-side policies

A-level Paper 2, June 2022, Q12Evaluate25 marks
Evaluate the view that supply-side improvements in the UK economy can best be achieved through the use of interventionist policies.

Examiner insight

What to cover
Interventionist policies: spending on education, infrastructure and industrial policy. Free-market policies: deregulation and tax cuts.
Watch out
Compare both approaches directly.
Question paper p.6Mark scheme p.21Examiner report p.6Marked student answers p.55Open in the toolPractise the AD/AS diagram
A-level Paper 2, June 2017, Q13Explain15 marks
Explain how changes in both government spending and taxation might affect the level of economic activity.

Examiner insight

What to cover
Higher government spending adds directly to AD. Lower taxes raise disposable income and profits, so consumption and investment rise. The multiplier increases the final effect. The reverse reduces activity.
Watch out
Cover both spending and taxation, and mention the multiplier.
Question paper p.7Mark scheme p.19Open in the toolPractise the AD/AS diagramPractise the multiplier diagram
A-level Paper 2, Specimen, Q11Explain15 marks
Explain the possible demand-side consequences of an increase in taxation in the UK.

Examiner insight

What to cover
Higher taxes reduce disposable income and profits, so consumption and investment fall. AD shifts left and the multiplier reduces output further. Inflation pressure falls.
Watch out
Separate direct and indirect taxes and include the multiplier.
Question paper p.6Mark scheme p.16Open in the toolPractise the AD/AS diagramPractise the multiplier diagram

Data response questions on fiscal policy and supply-side policies

AS Paper 2, June 2025, Q26Evaluate25 marks

Context 1: Population changes and the UK economy

Extract C (lines 8–9) states: ‘Increased spending on education and training is likely to be essential to achieve a long-term improvement in macroeconomic performance.’ Use the extracts and your knowledge of economics to evaluate the view that increased government spending on education and training is essential to achieve a long-term improvement in UK macroeconomic performance.

Examiner insight

What to cover
Education and training raise productivity and LRAS.
Watch out
Use the extracts.
Question paper p.19Mark scheme p.11Insert p.1Open in the toolPractise the AD/AS diagram
AS Paper 2, June 2025, Q31Explain10 marks

Context 2: Business investment in the UK economy

Extract E (lines 12–13) states: ‘To increase revenue, the main rate of corporation tax, the tax payable on firms’ profits, was increased to 25%.’ Explain why an increase in the tax payable on firms’ profits may lead to lower productivity growth.

Examiner insight

What to cover
Higher tax lowers post-tax profits, so investment in new capital and technology falls and productivity growth slows.
Watch out
Explain the link clearly.
Question paper p.27Mark scheme p.17Insert p.1Open in the toolPractise the AD/AS diagram
A-level Paper 2, June 2024, Q7Explain9 marks

Context 2: Globalisation and deglobalisation

Extract E (lines 17–18) states: ‘A low rate of corporation tax has also contributed to both short-run and long-run economic growth.’ With the help of a diagram, explain how a low rate of corporation tax may cause short-run and long-run economic growth.

Examiner insight

What to cover
Lower corporation tax raises investment, so AD rises in the short run and LRAS shifts right in the long run.
Watch out
Cover both the short and long run.
Question paper p.5Mark scheme p.12Examiner report p.4Open in the toolDraw it: AD/AS diagram
A-level Paper 3, June 2024, Q33Recommend25 marks

Case study: Regional inequality in the UK

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government intervene in the economy to try to reduce the differences in the economic prosperity of the various regions of the United Kingdom? Justify your recommendation.

Examiner insight

What to cover
Case for intervention: inequality, immobility, external benefits.
Watch out
Recommendation with conditions.
Question paper p.30Mark scheme p.10Insert p.3Open in the tool
AS Paper 2, June 2024, Q32Assess25 marks

Context 2: The levelling-up agenda

Extract F (lines 5–6) states: ‘As part of its long-term plan, the government has 12 levelling-up ‘missions’ or objectives. These include raising pay, employment and productivity throughout the UK’. Use the extracts and your knowledge of economics to assess the view that the government should increase the amount of spending allocated to poorer regions of the UK.

Examiner insight

What to cover
More regional spending can reduce inequality and raise productivity.
Watch out
Use the extracts.
Question paper p.29Mark scheme p.17Insert p.1Open in the tool
A-level Paper 2, June 2023, Q3Explain9 marks

Context 1: Corporation tax in Ireland

Extract C (line 13) states: ‘High economic growth rates allowed Ireland to run a budget surplus in 2018 and 2019.’ With the help of a diagram, explain how high economic growth could help to create a budget surplus.

Examiner insight

What to cover
Growth raises tax revenue and lowers benefit spending, so a surplus can appear.
Watch out
Explain automatic stabilisers.
Question paper p.3Mark scheme p.7Examiner report p.4Open in the toolDraw it: AD/AS diagram
A-level Paper 2, June 2023, Q4Assess25 marks

Context 1: Corporation tax in Ireland

Extract B (lines 1–3) states: ‘Ireland has dropped its low-tax policy of the past 18 years, which had helped to persuade some of the world’s biggest companies, including Google and Facebook, to site their European headquarters in Ireland.’ Using the data in the extracts and your knowledge of economics, assess the view that a rise in Ireland’s corporation tax rate is likely to have a damaging effect on its macroeconomic performance.

Examiner insight

What to cover
A higher corporation tax could reduce FDI, investment and growth.
Watch out
Use the data in the extracts.
Question paper p.3Mark scheme p.9Examiner report p.4Open in the toolPractise the AD/AS diagram
AS Paper 2, June 2022, Q31Explain10 marks

Context 2: Government spending and taxation

Extract F (lines 1–2 and 8) states: ‘As part of fiscal policy, government spending can be used to allocate resources to different regions and sectors of the economy and consequently, change the pattern of economic activity...Taxation also has a role to play in affecting the pattern of activity’. Explain ways in which a government can use fiscal policy to affect the pattern of economic activity.

Examiner insight

What to cover
Fiscal policy can shift activity between regions and sectors: regional spending, tax breaks, subsidies and taxes on particular goods.
Watch out
Explain ways clearly.
Question paper p.26Mark scheme p.16Insert p.1Open in the toolPractise the AD/AS diagram
AS Paper 2, June 2022, Q32Assess25 marks

Context 2: Government spending and taxation

Extract E (lines 4–6) states: ‘...the report suggested that significant increases in spending would be required to help improve the wellbeing of the UK population’. Use the extracts and your knowledge of economics to assess the view that a long-term, significant increase in government spending would be beneficial for the UK economy.

Examiner insight

What to cover
More spending can raise wellbeing, growth and public services.
Watch out
Use the extracts.
Question paper p.28Mark scheme p.17Insert p.1Open in the toolPractise the AD/AS diagramPractise the multiplier diagram
A-level Paper 2, November 2021, Q4Evaluate25 marks

Context 1: National debt and government spending

Extract C (lines 17–18) states: ‘Some argue that the UK should increase taxes rather than add to the national debt.’ Using the data in the extracts and your knowledge of economics, evaluate the view that an increase in a country’s national debt is damaging for its economy.

Examiner insight

What to cover
Higher debt can raise interest costs, reduce confidence and crowd out private investment.
Watch out
Use Greece and the UK from the extracts.
Question paper p.3Mark scheme p.10Open in the tool
A-level Paper 2, November 2020, Q4Evaluate25 marks

Context 1: Unemployment and the labour market

Extract B (lines 13–14) states: ‘It can be argued that supply-side reforms have gone too far in creating a highly flexible workforce and the government needs to do more in terms of protecting the nation’s workers’. Using the data in the extracts and your knowledge of economics, evaluate the view that free market supply-side reforms to labour markets are beneficial to the UK economy.

Examiner insight

What to cover
Flexible labour markets can lower unemployment and costs and attract investment.
Watch out
Use the extract data.
Question paper p.3Mark scheme p.9Examiner report p.4Open in the toolPractise the AD/AS diagram
A-level Paper 2, June 2019, Q8Evaluate25 marks

Context 2: UK fiscal policy and taxation

Extract F (line 1) states ‘In most of the UK, reducing the budget deficit has focused on austerity rather than tax rises.’ Using the data in the extracts and your knowledge of economics, evaluate the view that there is a strong case for significant increases in UK income tax rates.

Examiner insight

What to cover
Higher income tax raises revenue, reduces inequality and could fund public services.
Watch out
Use the data on Scottish tax rates.
Question paper p.5Mark scheme p.15Open in the toolPractise the AD/AS diagram
A-level Paper 3, June 2019, Q33Recommend25 marks

Case study: The UK’s broken housing market

After considering Extract E, and the original evidence in Extracts A, B, C and D, would you recommend that the Government should increase its spending on housing? Justify your recommendation.

Examiner insight

What to cover
Case for more spending: housing shortage, affordability, merit good, external benefits, jobs in construction.
Watch out
Paper 3 recommendations need a decision and conditions.
Question paper p.27Mark scheme p.10Insert p.2Open in the tool
AS Paper 2, June 2019, Q25Explain10 marks

Context 1: Artificial intelligence

Extract C (lines 10–11) states: ‘It has announced increased government spending on technological education and training.’ Explain how an increase in government spending could affect the national debt.

Examiner insight

What to cover
More government spending raises the budget deficit, so the national debt increases.
Watch out
Separate deficit and debt clearly.
Question paper p.16Mark scheme p.11Insert p.1Open in the tool
AS Paper 2, June 2018, Q31Explain10 marks

Context 2: A new approach to government policy

Extract E (lines 18–19) states ‘the 2017 Budget Report stated the intention to reduce the rate of corporation tax further to 17% by 2020.’ Explain how a reduction in corporation tax on firms’ profits might lead to supply-side improvements in the economy.

Examiner insight

What to cover
Lower corporation tax raises post-tax profits, so investment rises and LRAS shifts right.
Watch out
Explain the link to investment.
Question paper p.26Mark scheme p.18Insert p.1Open in the toolPractise the AD/AS diagram
AS Paper 2, June 2018, Q32Assess25 marks

Context 2: A new approach to government policy

Extract E (lines 3–4) states that there is ‘a new approach to government...a new, active role that backs business and ensures more people in all corners of the country share in the benefits of its success’. Use the extracts and your knowledge of economics to assess the view that a more active government industrial policy will make a significant improvement in macroeconomic performance.

Examiner insight

What to cover
An active industrial policy can raise investment and growth.
Watch out
Use the extracts.
Question paper p.28Mark scheme p.19Insert p.1Open in the tool
AS Paper 2, June 2016, Q31Explain10 marks

Context 2: How has immigration affected the performance of the UK economy?

Extract E (lines 1 to 3) states ‘European migrants who arrived in the UK since 2000 have made a net contribution of more than £20bn to UK public finances.’ Explain how immigration from the rest of Europe affects the UK government’s budget deficit.

Examiner insight

What to cover
EU migrants pay income tax and VAT and use public services. The net effect on the deficit depends on both.
Watch out
Explain both sides.
Question paper p.24Mark scheme p.18Insert p.1Open in the tool

Multiple choice questions

  1. A-level Paper 3, June 2025, Q6

    Which one of the following is most likely to indicate that a government is trying to cause a significant change in the pattern of economic activity?

  2. A-level Paper 3, June 2025, Q26

    Which one of the following is a supply-side policy that is most likely to lead to an improvement in the balance of trade in goods and services on the current account of the UK’s balance of payments?

  3. AS Paper 2, June 2025, Q12

    Which one of the following statements about supply-side policies is correct? Supply-side policies

  4. AS Paper 2, June 2025, Q18

    Table 3 shows the tax-free allowance and income tax rates in four countries, A, B, C and D. The tax-free allowance is the amount of income on which a person does not pay any income tax. Table 3 Tax-free Country Income tax rate allowance…

  5. A-level Paper 3, June 2024, Q9

    A government introduces a number of supply-side policies that increase the size of the country's working population and labour productivity. All other things being equal, which one of the following statements identifies the most likely…

  6. A-level Paper 3, June 2024, Q17

    Table 5 shows a household's income and the amount the household has to pay in tax for three taxes. Table 5 Income Tax F Tax G Tax H (£) (£) (£) (£) 10 000 1 000 500 500 30 000 2 500 1 500 1 800 60 000 4 000 3 000 4 000 Which one of the…

  7. A-level Paper 3, June 2024, Q19

    Table 6 shows the national debt and gross domestic product (GDP) for the UK in the second quarters of 2020 and 2022. Table 6 National debt GDP Year (£bn) (£bn) 2020 2069 2190 2022 2437 2391 All other things being equal, which one of the…

  8. AS Paper 2, June 2024, Q12

    A government is considering how to fund additional spending on healthcare. One option is to raise the rate of tax charged on the whole of firms’ profits from 19% to 25%. All other things being equal, for every 10 firms earning profits of…

  9. AS Paper 2, June 2024, Q17

    Figure 3 shows the demand (D) and supply (S) curves for a good in a market. Figure 3 The diagram shows a shift of the supply curve for the good from S1 to S2 caused by the removal of a subsidy. All other things being equal, which one of…

  10. AS Paper 2, June 2024, Q20

    Which one of the following is most likely to bring about a supply-side improvement in an economy? A fall in

  11. A-level Paper 3, June 2023, Q17

    Which one of the following is a role of the UK’s Office for Budget Responsibility?

  12. A-level Paper 3, June 2023, Q28

    Figure 8 shows the aggregate demand curve (AD) and the long-run aggregate supply curves (LRAS) for an economy. A redistribution of government spending from spending on welfare towards the funding of research and development shifts the…

  13. A-level Paper 3, June 2023, Q30

    Figure 9 shows the government budget balance for an economy from 2019 to 2023. Figure 9 All other things being equal, between 2019 and 2023, the national debt of this economy increased by

  14. AS Paper 2, June 2023, Q5

    Which one of the following is a direct tax?

  15. AS Paper 2, June 2023, Q10

    Table 3 shows the planned change in government spending, the size of the output gap and the size of the multiplier in four economies, W, X, Y and Z. Table 3 Change in government Output gap (£bn) Multiplier spending (£bn) W –80 +100 1.25 X…

  16. AS Paper 2, June 2023, Q11

    A government wishing to reduce inflation through the use of fiscal policy could

  17. AS Paper 2, June 2023, Q13

    The national debt is the sum of all past and current borrowing, less repayments, undertaken by

  18. AS Paper 2, June 2023, Q14

    Which one of the following is most likely to be an instrument of industrial policy?

  19. A-level Paper 3, June 2022, Q6

    Figure 2 shows two aggregate demand (AD1 and AD2) curves and the short-run aggregate supply (SRAS) curve for an economy. Figure 2 Which one of the following is the government most likely to increase if it wishes to use fiscal policy to…

  20. A-level Paper 3, June 2022, Q17

    Table 2 shows the amount paid in tax by individuals at different levels of income. Table 2 Income (£) Tax paid (£) 20 000 4 000 30 000 5 400 40 000 6 400 50 000 7 000 This tax is an example of a

  21. AS Paper 2, June 2022, Q11

    An indirect tax is a tax levied on

  22. AS Paper 2, June 2022, Q14

    Which one of the following is an example of expansionary fiscal policy? A reduction in the

  23. AS Paper 2, June 2022, Q16

    A government cuts the rate of corporation tax from 30% to 15%. This policy is most likely intended to

  24. AS Paper 2, June 2022, Q19

    In the short run, an increase in government borrowing is most likely to result in lower

  25. A-level Paper 3, November 2021, Q2

    Which one of the following statements regarding supply-side policies is correct? Supply-side policies

  26. A-level Paper 3, November 2021, Q10

    At the end of the previous financial year, a country had a national debt of £20 000 billion. The government’s planned expenditure for the current year exceeds its projected income by £100 billion. All other things being equal, which one of…

  27. A-level Paper 3, November 2020, Q21

    All other things being equal, which one of the following is most likely to increase the national debt?

  28. A-level Paper 3, November 2020, Q27

    Which one of the following is correct for a proportional tax on income?

  29. AS Paper 2, June 2020, Q11

    At the start of the year, the national debt for an economy was £920 billion. In the previous year, the budget deficit was £60 billion. In the current year, government spending is projected to fall by £20 billion and tax revenues to…

  30. AS Paper 2, June 2020, Q14

    Which statement applies to progressive taxes, but does not apply to proportional or regressive taxes? As income falls

  31. A-level Paper 3, June 2019, Q5

    Which one of the following policies is most likely to improve the supply side of the economy? A policy which

  32. AS Paper 2, June 2019, Q4

    The table shows income and expenditure on goods and services for four workers for the tax year ending April 2018. Income Expenditure Worker £ £ Alice 56 000 27 000 Jennie 17 000 19 000 Meshaal 45 000 35 000 Thavid 100 000 21 000 The…

  33. AS Paper 2, June 2019, Q10

    Which one of the following statements about supply-side policies and supply-side improvements is true?

  34. AS Paper 2, June 2019, Q12

    In the diagram below, as a result of the government implementing a new industrial policy, the long-run aggregate supply curve shifts from LRAS1 to LRAS2 The shift in LRAS suggests that the industrial policy is most likely to have

  35. AS Paper 2, June 2019, Q14

    A government wanting to reduce unemployment in the short run, through the use of fiscal policy, is most likely to

  36. A-level Paper 3, June 2018, Q2

    At the start of the financial year, an economy’s national debt stands at £1000 billion. Over the course of the year, the government plans to spend an extra £100 billion and borrow an extra £40 billion. If the government achieves its…

  37. A-level Paper 3, June 2018, Q29

    Which one of the following is most likely to cause an increase in the structural budget deficit?

  38. AS Paper 2, June 2018, Q3

    A government wants to increase the economy’s rate of long-run economic growth by implementing a supply-side policy. Which one of the following is a government policy aimed at stimulating the supply side of the economy?

  39. AS Paper 2, June 2018, Q4

    A government reduces its budget deficit. Other things remaining the same, the most likely short-run impact of this policy is

  40. AS Paper 2, June 2018, Q13

    A government is planning to reduce its budget deficit by increasing taxes on tobacco and reducing spending on defence. These policies are most likely to

  41. A-level Paper 3, June 2017, Q23

    The table below shows the marginal income tax rates in an economy for 2016. Table: Marginal income tax rates for every $1 of income Taxable Income Income tax rates 2016 From $0 to $10 000 0% From $10 001 to $30 000 10% From $30 001 to $50…

  42. A-level Paper 3, June 2017, Q24

    The national debt is the

  43. AS Paper 2, June 2017, Q7

    The table below shows annual income before tax for three different households and the total annual amount of income tax that each household pays. Household income Income tax before tax £18 000 £7 000 £40 000 £12 000 £80 000 £22 400 This…

  44. AS Paper 2, June 2017, Q14

    Which one of the following policy changes represents a contractionary fiscal policy?

  45. AS Paper 2, June 2017, Q19

    All other things remaining the same, which one of the following events would directly increase the size of the UK’s national debt? An increase in

  46. AS Paper 2, June 2017, Q20

    Which one of the following is most likely to improve the supply-side performance of an economy? An increase in

  47. AS Paper 2, June 2016, Q14

    Which one of the following is an example of contractionary fiscal policy?

  48. AS Paper 2, June 2016, Q16

    A budget deficit is most likely to occur when

  49. AS Paper 2, June 2016, Q18

    Which one of the following statements relating to the use of supply-side policy is correct?

  50. A-level Paper 3, Specimen, Q2

    Which one of the following is an example of a supply-side policy rather than a demand-side policy?

  51. A-level Paper 3, Specimen, Q21

    Which one of the following macroeconomic policies is a Keynesian economist most likely to recommend as a means of stimulating recovery for an economy that has been in recession for several years?

  52. AS Paper 2, Specimen, Q1

    Fiscal policy involves the use of

  53. AS Paper 2, Specimen, Q8

    A country has a slow rate of growth of productivity and rising cyclical unemployment. All other things being equal, which measures are most likely to increase the rate of growth of productivity and reduce cyclical unemployment?

  54. AS Paper 2, Specimen, Q16

    Which one of the following is most likely to lead to a supply-side improvement in an economy? An increase in

Question text is quoted from the question papers, © AQA, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.