WHALES Economics 30 on 30: Government Policies

In 2012, the Indian Government stated that it aimed to reduce its budget deficit to 5.1% of GDP. Which policy is most likely to help this aim?

A a decrease in import tariffs

B a decrease in the rate of interest

C an increase in the sale of state-owned assets

D an increase in government pension payments

• A

• B

• C

• D

Which policy is most likely to help to correct an adverse balance on the current account of the balance of payments?

A abolishing tariffs

B devaluing the currency

C reducing direct taxes

D reducing indirect taxes

• A

• B

• C

• D

A government reduced the tax on company profits from 28% to 20%. Which statement best describes this policy?

A It is both a contractionary fiscal policy and a supply-side policy.

B It is both an expansionary fiscal policy and a supply-side policy.

C It is both an expansionary fiscal policy and an expansionary monetary policy.

D It is both an expansionary monetary policy and a supply-side policy.

• A

• B

• C

• D

What is an example of a supply-side policy?

A an import quota to restrict the supply of goods

B a rise in interest rates to encourage the supply of savings

C a specific tax on the supply of goods to raise revenue

D a subsidy to businesses to

promote the supply of training courses

• A

• B

• C

• D

The diagram shows a shift in the aggregate demand curve, from AD1 to AD2. What might have caused this shift?

A a fall in the budget surplus

B a fall in the trade surplus

C a rise in imports

D a rise in the interest rate

• A

• B

• C

• D

There have been recent calls for the UK government to nationalise its railways. What would not be a reason for nationalising the railways?

A Private rail companies often charge high ticket prices.

B Private rail companies may exploit monopoly power.

C Railways are an essential part of national infrastructure.

D Railways should be treated as a public good.

• A

• B

• C

• D

Which policy mix is most likely to be effective in the short run for reducing inflation in a closed economy?

• A

• B

• C

• D

What is an aim of a transfer payment? A It allows the government to alter the final distribution of income. B It provides a ceiling for levels of income across the economy. C It removes the need for state subsidies. D It rewards the activity of a factor of production.

• A

• B

• C

• D

A central bank forecasts a rise in raw material costs. The government plans to increase spending on health and education. The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply, AS, diagram. What would be the new equilibrium point in the short run if the forecasts prove to be accurate and the government plans are implemented?

• A

• B

• C

• D

In a closed economy a rise in aggregate demand is needed to increase output in the country. What is necessary to achieve this increase in output in the economy?

A enough capacity to produce the extra goods and services demanded

B free trade to allow imports to make up any shortages in supply

C government spending to be less than tax revenue

D reduced credit to lower inflation

• A

• B

• C

• D