WHSS 30 on 30: Government Policies

In which year did the real value of money rise?

• A

• B

• C

• D

A country experienced a significant fall in unemployment but its inflation rate remained low. What could explain this?

A Global competition prevented firms passing on higher costs.

B Increased spending on imports had lowered the exchange rate.

C There was a low level of spare capacity in the economy.

D Wage rates had increased by more than labour productivity.

• A

• B

• C

• D

Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and lower boundary. The diagram shows the rate of inflation between 1994 and 2003 and the target rate between 1999 and 2003.

Inflation and inflation targets in Brazil, 1994 to 2003. What can be concluded from the diagram?

A The Brazilian government achieved its target in each year from 1999 to 2003.

B The inflation target was continuously reduced.

C The lowest level of inflation was achieved when an inflation target was used.

D The inflation rate was more stable after inflation targets were introduced.

• A

• B

• C

• D

The diagram shows the market for spectacles. Initially the market equilibrium price is PO and quantity Q3 is bought and sold. The government then sets both a maximum price of PX and a minimum price of PM. What effect will these measures have on the market for spectacles?

A create a shortage of spectacles equal to Q1Q5

B create a surplus of spectacles equal to Q2Q4

C create a surplus of spectacles equal to Q3Q4

D leave the quantity bought and sold unchanged

• A

• B

• C

• D

What is an example of an expenditure-dampening policy?

A an increase in income tax rates

B an increase in the level of import tariffs

C an upward revaluation of the exchange rate

D the introduction of import quotas

• A

• B

• C

• D

The table shows detail of the nominal interest rate and the inflation rate for selected countries in July 2010. What can be concluded from this information?

A The cost of living was higher in India than in China.

B The money rate of interest was higher in Indonesia than in Pakistan.

C The real rate of interest was positive in Japan but negative in Pakistan.

D The standard of living was higher in Indonesia than in India.

• A

• B

• C

• D

Which statement about a rise in the general price level in a country is correct?

A It is likely to create economic winners and losers in the country.

B It is unacceptable to modern governments.

C It means that no goods have fallen in price.

D It must make the average citizen poorer.

• A

• B

• C

• D

An economy with a long history of extensive barriers to trade decides to switch to totally free trade. What is most likely to increase in the short term?

A consumer surplus

B government revenue

C inflationary pressure

D profits of all domestic companies

• A

• B

• C

• D

What is most likely to cause demand-pull inflation?

A an increase in indirect taxes

B an increase in interest rates

C a reduction in direct taxes

D a reduction in the money supply

• A

• B

• C

• D

What might explain an increase in the volume of a country’s imports?

A an appreciation of the country’s exchange rate

B an increase in the country’s tariffs

C a recession in the country

D a rise in the country’s rate of income tax

• A

• B

• C

• D