Question:

4 (a) Explain three of the components of aggregate demand and consider the extent to which they
may be increased without leading to inflation. [8]
(b) The Chinese government has re-emphasised its commitment to rebalancing the economy
from one focused mainly on investment and exports to one aiming to increase the proportion
spent on domestic consumption.
Assess the extent to which it would be possible to achieve this by fiscal policy alone. [12]

Sample Answers: