AS Economics - Chapter 5 warm up quiz

What is the main goal of fiscal policy?

• To increase government spending

• To manage / influence aggregate demand

• To decrease taxes

• To limit the supply of merit goods

What happens to government spending on unemployment benefits during a recession

• It increases

• It stays the same

• It decreases

• It doubles

What are the three instruments of monetary policy?

• Interest rate, money supply and exchange rate

• Interest rate, inflation rate and GDP

• Interest rate, government spending and taxes

• Money supply, exchange rate and GDP

Monetary policy, like fiscal policy, seeks to influence

______________.

• supply and demand

• aggregate supply

• aggregate demand

• cross elasticity of demand

Supply side policy measures may reduce a current

account deficit and a financial account deficit by making

________ more price competitive

• merit goods

• domestic products

• foreign products

• public products

Increased spending on education and training and

increased investment may also increase exports and

encourage ______-.

• deadweight loss

• opportunity costs

• indirect taxation

• foreign direct investment

_______ will reduce disposable

income, leaving less income for household to spend on

imports as well as domestically produced products.

• A decrease in interest rates

• A rise in income tax

• A decrease in income tax

• A rise in employment

To encourage domestic consumers

and firms to switch to buying domestic products, a

government may impose a _____ on imports.

• tariff

• direct subsidy

• indirect subsidy

• free trade agreement

A _____ may result in the country’s

products becoming more internationally competitive

• higher exchange rate

• lower interest rate

• lower exchange rate

• embargo

Raising the foreign exchange rate, will ____________.

• raise export prices and increase import prices

• lower export prices and increase import prices

• raise export prices and lower import prices

• decrease export prices and lower import prices