Fiscal and monetary policies

Which of the following is not a government macroeconomic objectives

• Increasing tax rates
• Controlling inflation
• Reducing unemployment
• Promoting economic growth

What is a motive for a government to aim for low

unemployment?

• To reduce government spending on social programs.
• To increase the number of government regulations.
• To promote higher taxes for businesses.
• To promote economic stability and increase consumer spending.

Why may price stability increase a country’s economic

growth rate?

• It may cause leakages from the circular flow to exceed

  injections.

• It may make planning easier and so encourage

  investment.

• It may result in deflation and so encourage higher

  consumer expenditure.

• It may stimulate a rise in imports.

Country Y experiences a lower economic growth rate than

country Z.

Why might Country Y’s government be happier with its

economic performance than Country Z’s government?

• Country Y's government may prioritize social welfare and quality of life over raw economic growth.
• Country Z's government focuses solely on GDP growth.Country Z’s economic growth rate has fluctuated less

  than Country Y’s rate over the last ten years.

• Country Z invests more in military than in social programs.Country Z’s labour force has grown more than Country

  Y’s labour force.

• Country Y has a higher unemployment rate than Country Z.

After a period of high inflation, why might a recession help a

country achieve price stability in the future?

• A recession can reduce demand and lower prices, helping achieve price stability.
• A recession has no impact on price levels or stability.
• A recession leads to higher production costs, causing inflation.
• A recession increases consumer spending, driving prices up.

Country Y has a lower unemployment rate than Country Z.

What must this mean?

• Country Z has a healthier job market than Country Y.
• Both countries have the same unemployment rate.
• Country Y has a healthier job market than Country Z.
• Country Y has a higher unemployment rate than Country Z.

What is an advantage of a fall in the size of a country’s

national debt?

• Lower interest payments and increased fiscal flexibility.
• Lower taxes and improved public services.
• Increased government spending and economic growth.
• Higher national savings and reduced investment risk.

Which statement applies only to a progressive tax?

• It applies the same tax rate to all income levels.
• It reduces tax rates for higher income levels.
• It is only applicable to corporate income.
• It imposes higher tax rates on higher income levels.

A person earning $15 000 pays $5000 in income tax. Another

person earning $40 000 pays $10 000 in income tax and a

third person earning $100 000 pays £20 000 in income tax.

Which type of tax is this?

• Progressive tax
• Value-added tax
• Regressive tax
• Flat tax

Which form of government spending is an example of capital

spending?

• Government spending on purchasing office supplies.
• Government spending on building a new highway.
• Government spending on social welfare programs.
• Government spending on employee salaries.