Evaluate what more, if anything, the Government should do to achieve a sustained increase in investment in the UK economy

AQA AS-Level Economics Paper 2 June 2025 Insert

Extract F (lines 11–13) states: ‘There are signs that business investment is starting to increase again, but government intervention may be needed to encourage firms to continue investing, to try to ensure the increase in investment is sustained.’

Use the extracts and your knowledge of economics to evaluate what more, if anything, the Government should do to achieve a sustained increase in investment in the UK economy. (25 marks)

Plan

• Paragraph 1
  • Argument: one way to achieve greater investment is through lower interest rates
  • Diagram: increase in AD
  • Evaluation: however, lower interest rates can contribute to higher inflation rates
• Paragraph 2
  • Argument: another way to achieve greater investment is through supply-side fiscal policies like lower corporation taxes
  • Diagram: increase in AD and LRAS
  • Evaluation: however, lower corporation taxes can cause a worsening of the budget deficit

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