The Role of Government in the Economy

Which of the following is a key role of the government in the economy?

• Ensuring full employment

• Maximizing profits for private businesses

• Eliminating all taxes

• Controlling all prices in the market

A direct tax is:

• Collected by intermediaries (e.g., VAT on goods)

• Paid directly by individuals/entities to the government (e.g., income tax)

• Only imposed on imported goods

• A tax on corporate profits only

Fiscal policy refers to government actions in:

• Adjusting interest rates

• Changing tax rates and public spending

• Controlling the money supply

• Regulating international trade

Which policy would the government most likely use to combat inflation?

• Increase spending on public projects

• Reduce taxes

• Raise interest rates (monetary policy) or cut spending (fiscal policy)

• Print more money

Economic growth is best measured by an increase in:

• Government expenditure

• Gross Domestic Product (GDP)

• The number of public sector jobs

• Tax revenues

Indirect taxes are levied on income and profits.

• True

• False

Transfer payments, like unemployment benefits, are used to redistribute income.

• True

• False

A favourable balance of payments means a country's imports exceed its exports.

• True

• False

Monetary policy involves changes in government spending and taxation.

• True

• False

Economic development includes improvements in living standards, not just GDP growth.

• True

• False