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WorksheetsMacro policies
Total questions: 15
Worksheet time: 8mins
An economy has a high rate of inflation. In response to this, its government increases income tax.
What is the most likely reason for this increase?
to discourage the consumption of harmful goods
to raise money for government spending
to redistribute income
to reduce total demand
Interest rates are sometimes raised to control inflation.
Why might this policy be effective?
Consumers may save more.
Government spending may increase.
Investment may be encouraged.
The exchange rate may fall.
A government’s revenue grew 8% to $3.25 trillion. Its expenditure was reduced to $3.69 trillion.
What can be concluded from this?
A
B
C
D
A country’s inflation rate, measured by the Consumer Prices Index (CPI), was 3% in year 1. Three years later it was 0.8%. What can be concluded from this information?
Prices are falling
The rate of price increases is falling
The real rate of interest is negative
There is increased purchasing power for those on fixed incomes
What will deflation most likely lead to?
a fall in the real value of debts
an increase in the exchange rate
an increase in the rate of interest
an increase in the real purchasing power of money
Economic growth can be defined as
a reduction in a country’s rate of inflation
an increase in a country’s exports
an increase in a country’s population.
an increase in a country’s productive capacity.
In a year, two changes occurred in a company. Company directors’ salaries increased by 15%. Office workers’ wages increased by 5%. The rate of inflation was 3.4%.
What happened to real income?
A
B
C
D
Gross Domestic Product (GDP) is a better measure of comparative living standards when it is adjusted for the effects of
exports and inflation
imports and exports.
population change and exports.
population change and inflation.
What is a fiscal policy measure?
direct tax
exchange rates
interest rates
regulation
A government uses expansionary monetary policy.
What does the government decrease?
bank lending
interest rates
the budget deficit
the money supply
What is fiscal policy?
government decisions on money supply and interest rates taken to influence total demand
government decisions on spending and taxation designed to influence total demand
government measures designed to influence total supply in the economy
government regulation of the foreign exchange rate to influence imports
What may cause deflation?
advances in technology and increases in labour productivity
government using a policy of very low interest rates
increases in the costs of production that reduce firms’ profits
increases in the rate of inflation as measured by the CPI
A country has rapidly increasing inflation.
What is an example of a monetary policy measure to reduce this problem?
increasing income tax
increasing interest rates
introducing maximum prices for some products
subsidising key industries
The diagram shows selected areas of government spending for a country.
What was the total government spending on merit goods?
$32.2 billion
$81.8 billion
$118.2 billion
$261.9 billion
What is included in the construction of the Consumer Prices Index (CPI)?
a base year
incomes
price elasticity of demand
quantity supplied
