Which policy is most likely to help to correct an adverse balance on the current account of the balance of payments?

A abolishing tariffs

B devaluing the currency

C reducing direct taxes

D reducing indirect taxes

A government reduced the tax on company profits from 28% to 20%. Which statement best describes this policy?

A It is both a contractionary fiscal policy and a supply-side policy.

B It is both an expansionary fiscal policy and a supply-side policy.

C It is both an expansionary fiscal policy and an expansionary monetary policy.

D It is both an expansionary monetary policy and a supply-side policy.

What is an example of a supply-side policy?

A an import quota to restrict the supply of goods

B a rise in interest rates to encourage the supply of savings

C a specific tax on the supply of goods to raise revenue

D a subsidy to businesses to

promote the supply of training courses

The diagram shows a shift in the aggregate demand curve, from AD1 to AD2. What might have caused this shift?

A a fall in the budget surplus

B a fall in the trade surplus

C a rise in imports

D a rise in the interest rate

There have been recent calls for the UK government to nationalise its railways. What would not be a reason for nationalising the railways?

A Private rail companies often charge high ticket prices.

B Private rail companies may exploit monopoly power.

C Railways are an essential part of national infrastructure.

D Railways should be treated as a public good.

Which policy mix is most likely to be effective in the short run for reducing inflation in a closed economy?

What is an aim of a transfer payment? A It allows the government to alter the final distribution of income. B It provides a ceiling for levels of income across the economy. C It removes the need for state subsidies. D It rewards the activity of a factor of production.

A central bank forecasts a rise in raw material costs. The government plans to increase spending on health and education. The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply, AS, diagram. What would be the new equilibrium point in the short run if the forecasts prove to be accurate and the government plans are implemented?

In a closed economy a rise in aggregate demand is needed to increase output in the country. What is necessary to achieve this increase in output in the economy?

A enough capacity to produce the extra goods and services demanded

B free trade to allow imports to make up any shortages in supply

C government spending to be less than tax revenue

D reduced credit to lower inflation

What is an example of fiscal policy aimed at increasing aggregate demand in an economy?

A increasing expenditure by firms on skills training programmes for unskilled workers

B increasing the commercial banks’ lending ability

C reducing the rate of income tax for all income earners

D reducing the rate of interest on loans to manufacturing companies

What would be categorised as direct government provision of goods and services?

A a government grant to a firm to provide healthcare services

B a government regulation on the amount of sugar in soft drinks

C a government subsidy to a firm that operates a regional train service

D a government takeover of a local bus service

Which combination of changes is most likely to lead to an increase in the aggregate price level and the level of real output?

The diagram shows the aggregate demand (AD) and aggregate supply (AS) for an economy. Which changes in subsidies and indirect taxes would have caused the change in AS shown?

A higher subsidies and higher indirect taxes

B higher subsidies and lower indirect taxes

C lower subsidies and higher indirect taxes

D lower subsidies and lower indirect taxes

In its recent budget a government increased defense expenditure and also the amount spent on training that increased the productivity of the workforce. The initial equilibrium point is shown by X on the aggregate demand (AD) and aggregate supply (AS) diagram. What would be the equilibrium point after these changes?

A teenager received a cheque for $50 as a birthday gift from her parents. The teenager paid the cheque into her savings account at the bank. Why is this gift a transfer payment?

A It did not involve a cash payment.

B It transfers money between bank accounts.

C The parents did not spend their money.

D The teenager did not produce any output

The diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for an economy. Which situation would not cause a shift from AD1 to AD2?

A a fall in the general price level as government spending is reduced

B an easing of credit by commercial banks for household purchases of consumer goods

C an increase in earnings from exports of high-tech products

D an increase in investment by firms in computer system

What is an expenditure-switching policy to reduce a country’s balance of payments deficit?

A an increase in budget surplus

B an increase in direct taxes

C an increase in import tariffs

D an increase in interest rates

The diagram shows the demand and supply curves for healthcare in a private market. What would happen if the government provides the same amount of healthcare free of charge? A Healthcare will become a public good. B Healthcare will no longer have external benefits. C There will be over-consumption of healthcare. D There will need to be rationing.

Greece had an unemployment rate of over 20% in 2016. Which combination of policies would be best for the Greek government to try to reduce unemployment?

What would be classified as a supply-side policy measure?

A a law to reduce the power of trade unions

B a reduction in the government’s fiscal deficit

C an open market sale of securities

D the imposition of a tariff on imported goods

The diagram shows the relationship between the income tax rate and tax revenue. Which statement is correct?

A A tax rate cut from Y to Z will cause tax revenue to decrease.

B At tax rates below Z a tax rate cut will cause tax revenue to increase.

C The greater the rate of tax increases beyond Z, the smaller will be the tax revenue generated.

D Tax revenue will always increase as the rate of income tax increases.

Which statement best describes a transfer payment?

A It is a loan from the government to help firms.

B It is a payment to individuals not linked to economic activity.

C It is the redistribution of income from government to individuals for work done.

D It is the redistribution of income from households to firms for goods purchased.

The diagram shows an economy with an initial equilibrium real output of Y1 at a price level of P1. Which combination of events is likely to cause the equilibrium real output to rise to Y2?

A an increased budget deficit and a fall in energy costs

B an increased budget surplus and a rise in energy costs

C an increased trade deficit and a fall in indirect tax D an increased trade surplus and a rise in indirect tax

To counter deflation a central bank uses expansionary monetary policy. What is likely to result?

A a higher cost of borrowing

B a higher rate of inflation

C an appreciation of the exchange rate

D an increase in government debt

A government reduces the benefits that it pays to unemployed workers to increase the incentive to work. Which types of macroeconomic policies are being used?

Country X is an open economy with a fixed exchange rate. Which combination of fiscal and monetary policies would be most effective in solving deflation?

Which tax is levied on a stock of wealth rather than a flow of income?

A company profits tax

B goods and services (expenditure) tax

C individual direct tax

D personal asset tax

Why might a government privatise the railway industry in a country?

A Economists classify railway journeys as a public good.

B Privatisation would provide funds for investment from a wider range of sources.

C Privatised railways would be run to maximise producer surplus.

D Railway fares can be taxed to raise money for the government only if railways are privatised.

A government subsidy of $50 per unit is paid to manufacturers of solar panels. What will be the impact of this?

A It will guarantee equilibrium in the solar panel market.

B It will maintain high market prices.

C It will reduce total production costs.

D It will stabilise levels of output.