O Levels Economics (2281)•2281/11/M/J/24

Explanation
Full Employment Boosts Budget Surplus via Higher Revenues and Lower Spending
Steps:
- Define budget surplus as government revenue exceeding expenditure.
- Identify how macroeconomic aims affect revenue (e.g., taxes) and spending (e.g., benefits).
- Evaluate each option's impact on this balance.
- Select the aim that maximizes revenue gains and spending cuts.
Why A is correct:
- Full employment increases income and corporate tax revenues while reducing unemployment benefit spending, directly widening the surplus per the fiscal balance formula (Revenue - Expenditure > 0).
Why the others are wrong:
- B: Low redistribution implies reduced welfare spending but also lower progressive taxes, netting neutral or deficit impact.
- C: Low inflation stabilizes prices but doesn't inherently raise revenues or cut costs enough for surplus growth.
- D: Balance of payments stability aids trade but has indirect, minimal effects on domestic fiscal balances.
Final answer: A
Topic: The macroeconomic aims of government
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