WorksheetsRelationship between macroeconomic objectives and policies
Total questions: 55
Worksheet time: 2hrs 45mins
What is taxation?
Taxation is when governments finance their expenditure by charging a percentage from individual citizens income and business profits.
When you text your best friend .
When governments give a percentage of business profits to citizens.
When businesses take a percentage of expenditure from governments.
Governments use taxation to.........
encourage or discourage certain economic decisions.
use the money generated from individuals and businesses to run the country.
for providing public services such as schools, hospitals, policing etc.
All of the above.
What Is Fiscal Policy?
The finance department.
a policy to monitor exchange rates.
When a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
a law set by the government.
What is monetary policy?
Something to do with money.
A policy that allows central banks to influences a nation's money supply through interest rates.
A policy that allows central banks to influences a nation's money supply through exchange rates.
A policy that allows governments to influences a nation's money supply through interest rates.
What are the constraints on public spending?
Public sector organisations that supply services directly may get funding cuts.
Cuts in pensions and other government payments may affect consumer spending
Answer 1 and 2
Neither
How can governments affect business activity?
By buying shares in the business.
By becoming a Plc.
By changing laws and regulations.
Government affect on business activity by? Your answer may include multiple options.
Infrastructure provision
Legislation
Competition policies
Environmental legislation
None of the above
Define Trade Policy?
Doing business with another company.
Refund and Exchange for customers.
Trade policy refers to the regulations and agreements that control imports and exports to foreign countries.
Inflation is the sustained increase in the price of a product
True
False
The CPI measures the cost of goods and services in a typical household in the economy.
True
False
The___________ a country’s GDP, the better the country’s standard of living.
lower
greater
smaller
answers 1 and 3 are correct
How is income and wealth redistributed
By having different entry/skill requirements for jobs
Through choice of how to spend/invest earnings
Through taxation
Through population migration
Which of the following are consequences of inequality? You may choose more than one option (if any)
Poverty
Enterprise
Poor health
Economic growth
Which of these is NOT a government objective that fiscal policy is used to achieve?
Price stability
Low unemployment
Economic growth
Decrease money supply
What is the definition of a budget surplus?
When tax revenue is greater than government spending
When government spending is greater than tax revenue
The source of finance for government spending
When government spending is equal with tax revenue
Which is an example of expansionary fiscal policy?
The Federal reserve lowers the discount rate
The government raises taxes on all citizens by 5%
The government increases spending by building more infrastructure
The federal reserve increases the reserve requirement
Monetary Policy is the Central Bank 's or the Federal Reserve Systems attempt to ....
control the Federal Government's debt
control state governments' spending
control the amount of money in circulation
control the maximum price and minimum price
Which of the following scenarios would cause the nation’s money supply to increase?
Decreasing government spending
Raising interest rates
Lowering interest rates
Selling government's bonds to investors
What action would the Federal Reserve or the central bank take to keep inflation low?
Buy government securities
Decrease the required reserve ratio
Increase taxes
Increase interest rates
Which is NOT the objective of supply-side policies?
increase potential output and achieve economic growth
increase long-run aggregate supply and full employment output
stimulate the supply side of the economy to achieve economic growth
decreasing money supply to control inflation
Which of the following is advantage of supply-side policies?
They are long term in nature and may take a long time to have any effect on the economy
Deregulation of an industry may increase competition amongst firms and create efficiency
Additional spending on education, training and providing incentives for firms to locate in particular areas may be ineffective
Interventionist policies require a large amount of government spending which may worsen a budget deficit
Which of the following is disadvantage of supply-side policies?
An increase in LRAS will, ceteris paribus, increase economic growth without increasing inflation
Investment in education and training will benefit the whole of society
Flexible labour markets may reduce costs for business but can create job insecurity for workers
Investment in infrastructure may improve standards of living
Which of these is not a macroeconomic objective of governments?
Low and stable inflation
Increasing pofitability of companies
Full employment
High and sustainable growth
inflation hurts those on low incomes and savers because it decreases their
(a)
the best type of policy for dealing with demand pull inflation is
(a)
demand-pull inflation is best dealt with by contractionary policy because it results in a decrease in ............... and ................
(a)
4. If a government can achieve their aims
It will create a favorable economic climate for business and improve people’s standard of living
The level of employment will decrease
People’s standard of living will deteriorate
People's standard of living will stagnate
5. How do governments want to best achieve their aims?
By exploiting people
By maximizing the exploitation of natural resources
In satisfying big companies requests
In an environmentally sustainable manner
7. Expansionary policy will often be used, except
During recession
During rising inflation
During an economic downturn
8. Supply-side policies:
Aim to maximizing the exploitation of natural resources
Aim to boost the productive potential of the economy and increase aggregate supply
Aim to slow down the economy during rising inflation
Aim to unbalance the trade balance
9. When implementing supply-side policies, the government uses a range of tools to increase the quantity and quality of resources in the economy such as:
Subsidies
Competition policy
Tax incentives
All three
11. Contractionary policy will often be used (you can choose more than one):
During recession
During rising inflation
During an economic downturn
During an overheating economy
A Trade-off is
a purchase in a marketplace.
an alternative that we sacrifice when we make a decision.
any good or service a consumer needs.
a factor of production.
Supply-siders generally favor _______.
tax increases
decreases in demand
deregulation
government intervention
Successful supply side policies will boost
government debt, budget surplus , jobs and deflation
jobs, exports, welfare, price stability and growth
sustainable economic growth and reduce the budget surplus
none of these options
Economic policymakers find supply-side policies attractive because ...
supply-side policies eliminate dead-weight loss from taxation.
supply-side policies do not imply a short-run trade-off between unemployment and inflation.
supply-side policies will reduce output gaps by increasing total factor productivity.
supply-side policies help to shift the Beveridge curve away from the origin.
According to the economists, which of the following may help a country reduce inflation, but will not help that country to get out of a recession?
increased spending by the government on health care
an increase in taxes on business investments
an increase in military spending
a decrease in the tax rate on consumer income
The diagram represents which type of inflation?
demand-pull
cost-push
Unemployment generally________during recessions and ________during expansions.
Falls; rises
Falls; falls
Rises; falls
Rises; rises
Inflation is most likely to occur during which phase of the business cycle
Expansion
Contraction
What happens when economic growth gets too high?
High levels of inflation
Low levels of inflation
Unchanged levels of inflation
Inflation is tied to economic growth (i.e. a 1% increase in economic growth means a 1% increase in inflation).
When cost-push inflation occurs what happens to the SRAS curve in the classical model?
It shifts to the left
It doesn't change
It shifts to the right
When demand-pull inflation occurs which way does the aggregate demand [AD] curve shift?
It doesn't shift
It shifts to the right [upwards]
It shifts to the left [downwards]
Which of the following factors will cause cost-push inflation?
Rising wages
Lower business taxes
Cheaper imported raw materials
Rising prices of raw materials
Which of the following changes may result from a weak exchange rate?
Higher wages
Imported raw materials become more expensive
An increase in government spending
An increase in export revenue
If the rate of inflation is higher than interest rates, real interest rates are said to be......
Positive
Negative
Which group benefits from negative real interest rates?
Borrowers
Savers
No-one
What are the 4 factors that lead to a country’s economic growth?
investment in human capital, investment in physical capital, land (natural resources), entrepreneurship
good international relations, a democratic president, strict laws, freedom of press
a powerful military, strong dictatorial leadership, communist regime, little personal freedom
a monarchy, the World Bank, a parliamentary democracy, personal freedom
Why should countries invest in developing human capital?
because the more people you have working in one area like a capital the more productive it will be
it leads to a lower GDP
it leads to lower literacy rate
investment in the education and skills training of people creates a smarter and more productive workforce, which relates to a higher GDP.
The graphs show how consumer prices and real GDP changed in a country between 1995 and 2005. Which conclusion may be drawn from the graphs?
Living standards remained roughly constant between 1995 and 2005.
The level of GDP was lower in 2005 than in 2000.
The country experienced continuous economic growth between 1995 and 2005.
The price level fell between 2000 and 2003.
