IGCSE Business Studies - 6.1.2 - Government Control

Which of the following is NOT a common government economic objective?

• Increasing Gross Domestic Product (GDP)

• Reducing unemployment

• Maximizing business profits

• Controlling inflation

What does Gross Domestic Product (GDP) measure?

• The total value of goods and services produced in a country

• The number of businesses in a country

• The total amount of tax revenue collected

• The total amount of government spending

A high GDP growth rate usually indicates that:

• The economy is shrinking

• Businesses are producing more goods and services

• Inflation is decreasing

• Unemployment is rising

If a government wants to reduce unemployment, it might: a) Increase taxes on businesses b) Decrease government spending c) Encourage businesses to expand through subsidies d) Increase interest rates

• Increase taxes on businesses

• Decrease government spending

• Encourage businesses to expand through subsidies

• Increase interest rates

Controlling inflation is important because:

• It reduces government tax revenue

• It stabilizes prices and maintains consumer confidence

• It forces businesses to reduce wages

• It increases unemployment

If the government increases corporate taxes, businesses are likely to:

• Increase investment in new projects

• Reduce profit margins or pass costs to consumers

• Lower prices of goods and services

• Increase wages for employees

A reduction in income tax rates would likely lead to:

• Lower consumer spending

• Higher consumer spending

• Reduced business sales

• Lower business profits

Which of the following is a possible effect of increased government spending on infrastructure?

• Businesses experience lower demand

• Employment opportunities increase

• Interest rates decrease

• Inflation falls

If the government reduces public sector spending, businesses that supply goods to the government might:

• Experience increased demand

• Need to hire more workers

• Reduce their workforce and production

• Raise prices to increase profits

Higher value-added tax (VAT) would most likely result in:

• Lower prices of goods and services

• Higher demand for luxury goods

• Increased costs for businesses and consumers

• A decrease in government revenue