Government macroeconomic intervention — AS & A Level Economics (9708) questions by topic

What is not an example of monetary policy? A a rise in import tariffs on manufactured goods B a rise in interest rates by the central bank C a rise in credit regulations D a rise…

A government uses expansionary monetary policy over a three-year period. Which combination identifies the likely impact of such a policy? real GDP price level unemployment --- ---…

What is not an example of an expansionary supply-side policy? A a reduction in government spending on training B an increase in support for technological improvement C a reduction…

The table shows the amount of tax paid on three different levels of income. Which combination shows a proportional income tax system? tax paid on annual income of $10 000 tax paid…

What is likely to be an expansionary monetary policy? A a decrease in the availability of credit B a decrease in the exchange rate C an increase in government spending D an…

A government increases direct taxation to reduce its budget deficit. How is this likely to affect the government's ability to achieve its macroeconomic objectives? economic growth…

An income tax has a tax-free allowance of $10 000 and a single rate of 25%. What type of tax is this? A indirect B progressive C proportional D regressive

Which supply-side policy will encourage new entrepreneurs? A an increase in government subsidy to small firms B an increase in the national minimum wage C an increase in the power…

A government wants to operate a tighter monetary policy. What would it increase? A budget surplus B interest rate C money supply D rates of taxation

Which action is classified as a fiscal policy measure? A fixing a currency to another country's currency B tightening credit regulations on banks C providing guidance to industry…

The table shows government spending and revenue over a three-year period. year government spending ($bn) government revenue ($bn) --- --- --- 1 90 100 2 110 110 3 130 115 What can…

Which statement about supply-side policies is correct? A They solve the problem of demand deficient unemployment. B They do not involve an opportunity cost. C They reduce…

A government has a target to reduce the rate of inflation. Why might it not want to raise interest rates to achieve this target? A aggregate demand may fall B aggregate supply may…

Explain the difference between a budget surplus and a budget deficit and consider the extent to which a budget surplus is better than a budget deficit.

Identify the overall change in the unemployment rate in South Africa between January 2020 and October 2022.

Explain why expenditure on education and training is a supply-side policy and consider why its impact on the general price level may differ between the short run and the long run.

A country's government decides to set artificially low interest rates. What describes a negative consequence to this country of this policy? A a higher rate of consumer price…

A government increases its inflation rate target from 3% to 5%. What is a likely reason for this? A to increase economic sustainability B to increase saving C to reduce a balance…

What would be a macroeconomic policy objective for a government in a developed economy? A to improve sustainability B to provide public goods C to reduce the power of trade unions…

Which combination of income tax and government benefit payment systems will produce automatic stabilisation? income tax benefit payments system --- --- --- A progressive means…

The diagram outlines the monetary transmission mechanism following quantitative easing. Key words have been omitted from the process. central bank ...1... government assets ↓…

In a closed economy, the central bank raises interest rates to reduce an increasing rate of inflation. Which macroeconomic policy objective is this targeting? A a surplus on the…

The central bank of a country decreases interest rates. What are the likely consequences? internal value of the currency external value of the currency --- --- --- A falls falls B…

What is the most likely consequence when there is an increase in the national debt? A the creation of additional money B a current account deficit on the balance of payments C a…

A country's government decides to set artificially low interest rates. What describes a negative consequence to this country of this policy? A a higher rate of consumer price…

A government increases its inflation rate target from 3% to 5%. What is a likely reason for this? A to increase economic sustainability B to increase saving C to reduce a balance…

What would be a macroeconomic policy objective for a government in a developed economy? A to improve sustainability B to provide public goods C to reduce the power of trade unions…

An economy is at its natural rate of unemployment. Under which circumstances will an increase in government spending aimed at reducing unemployment be most likely to conflict with…

A country is experiencing high unemployment, high inflation and a trade deficit. Which policy is most likely to solve all of these problems? A devaluation of the currency B export…

The United States government has been using a policy of quantitative easing to increase economic growth. What is the most likely effect of this policy on the internal and external…

A country is experiencing stagflation, when there is a high rate of inflation at the same time as a negative output gap. With the help of a diagram, evaluate the effectiveness of…

With the help of an injections and withdrawals graph, assess the impact of a decrease in interest rates on the level of employment in an economy. [20]

The article refers to structural unemployment. Explain what this means and whether it is the same as the natural rate of unemployment.

A country is experiencing stagflation, when there is a high rate of inflation at the same time as a negative output gap. With the help of a diagram, evaluate the effectiveness of…

Identify what is included in the HDI. [3]

A country with an open economy has falling demand for exports. Consider the view that monetary policy alone will solve this problem. [20]

Evaluate how a country might increase its potential economic growth. [20]

To counter deflation a central bank uses expansionary monetary policy. What is likely to result? A a higher cost of borrowing B an increase in aggregate demand C an appreciation…

Which statement about government budget surpluses and deficits is the most accurate? A A surplus implies that the balance of payments is in surplus. B A surplus implies that the…

What is most likely to decrease if a government uses expansionary fiscal policy? A a balance of payments deficit B cyclical unemployment C the level of wages D the rate of…

Sweden had a change in its Consumer Prices Index (CPI) of -0.6%. Which combination of policies might its government use to restore price stability? A increase interest rates and…

How does a government use its central bank to promote an expansionary monetary policy? A increasing interest rates for commercial banks B increasing the interest rate on the…

Which combination of problems would be most likely to cause a country's government to reduce taxation and lower interest rates? A demand-pull inflation and a balance of payments…

Which combination of fiscal and monetary policies is most likely to be effective in the short run to prevent deflation in a closed economy? fiscal policy monetary policy --- ---…

Which macroeconomic objective is most likely to be achieved by increasing income tax? A depreciation of the exchange rate B economic growth C low unemployment D price stability

What is not a supply-side policy? A increasing government expenditure on infrastructure B increasing research and development expenditure C increasing subsidies for education and…

An economy has a sudden increase in inflation caused by a large rise in energy prices. It also enters a recession with rising unemployment. A decrease in which policy variable is…

Which row correctly identifies the characteristics of an economy experiencing the liquidity trap? rate of economic growth rate of inflation rate of interest --- --- --- --- A high…

A government uses monetary policy and fiscal policy to solve a problem of deflation. Which policy combination is likely to be the most successful? monetary policy fiscal policy…

The table shows the relationship between inflation and unemployment in Germany from 2019 to 2022. 2019 2020 2021 2022 --- --- --- --- --- inflation: annual variation (%) −1.9 −1.6…

The diagram represents the short-run Phillips curves SRPC₁ and SRPC₂ and the long-run Phillips curve in an economy, where NRU is the natural rate of unemployment. The economy is…

An economy has a sudden increase in inflation caused by a large rise in energy prices. It also enters a recession with rising unemployment. A decrease in which policy variable is…

What is not an example of an expenditure-reducing policy? A a decrease in government spending B a depreciation of the exchange rate C an increase in direct taxes D an increase in…

In 2022, many countries experienced a high rate of inflation caused by disruptions to the supply of goods and services arising from the Covid-19 pandemic and the conflict between…

In many countries increased government spending is regarded as a cause of economic growth. It is sensible, therefore, for a government to spend more to increase economic growth as…

A government makes two changes to income tax. 1 The individual tax-free income allowance is increased. 2 The marginal rate of income tax is decreased. How will these changes…

Which supply-side policy is most likely to decrease a government's budget deficit? A cutting tax rates on company profits B cutting unemployment benefits C raising spending on…

Which combination of fiscal and monetary policies would certainly be expansionary? government spending taxes money supply --- --- --- --- A decrease decrease decrease B decrease…

The central bank of a country raises interest rates to reduce the general price level. When is this policy likely to have the biggest impact? position of the economy on its…

What is an example of a macroeconomic policy? A encourage the consumption of merit goods B reduce pollution in the steel industry C maintain general price stability D reduce…

Which supply-side policy is likely to lower real output before raising it? A increased spending on early years education B increased spending on infrastructure C reduced import…

If interest rates are reduced, what is most likely to decrease? A borrowing by firms B consumer spending C import prices D export prices

Supply-side policy often has fiscal consequences. Which statement is not correct? A Increased government spending supporting technical progress has beneficial long-term…

Changes in fiscal policy can affect the distribution of income and wealth. Which combination of fiscal policy would most likely be regressive? A a fall in the lowest level of…

What does it mean when a government has a budget surplus? A Government revenue exceeds expenditure. B Imports exceed exports. C The government has an expansionary fiscal policy. D…

With the help of examples, explain the difference between the marginal rate of taxation and the average rate of taxation and consider whether a government should decide to…

What is not an aim of macroeconomic policy? A economic development B exchange rate stability C Pareto optimality D satisfactory balance of payments

Countries in South East Asia have some of the highest income inequality in the world. Which policy could be adopted by governments in South East Asia to reduce income inequality…

A country experiences an increase in unemployment due to deficiency of aggregate demand. What will be the effect of this on tax revenue and government expenditure, assuming that…

A government is successful in raising the rate of economic growth. As a result, which other macro-economic aim would it most likely have achieved in the short run? A balance of…

Which argument for lowering income tax rates is always valid? A It boosts economic activity. B It promotes the incentive to work. C It reduces the budget deficit. D It reduces the…

A government decides to cut the rate of interest in order to stimulate aggregate demand and increase employment. Why might this policy not work in a recession? A Business…

How would decreasing interest rates be most likely to reduce unemployment? A by decreasing the borrowing costs of business B by decreasing the government's budget deficit C by…

An economy experiences falling incomes and rising unemployment. The central bank decides to reduce the rate of interest to stimulate economic activity. When would such a policy be…

Monetary policy does not usually work immediately. Which time lag is likely to be the least concern to a government whose priority is a rapid domestic impact? A the time it takes…

A government wants to reduce the current account deficit on the balance of payments. What is an example of an expenditure-reducing policy? A a devaluation of the currency B a…

In periods of rising and persistent inflation, consumers and workers change their expectations of the future rate of inflation. Evaluate, with the help of a diagram(s), the…

Central banks can control the money supply. An increase in the money supply will cause inflation, therefore central banks can control inflation. Evaluate this statement. [20]

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…

The diagram shows the current equilibrium of an economy. The government introduces a contractionary monetary policy. What is the most likely outcome? A a fall in investment and a…

Supply-side policies can be used to correct cost-push inflation. Which policy would best achieve this aim in the long run? A allowing trade unions to maintain work practices…

Explain how monetary policy may be able to reduce the rate of inflation in an economy and consider the likely success of this policy.

What is the most effective policy a government could introduce to reduce frictional unemployment? A cut welfare spending on benefits B improve information about job vacancies C…

Which combination of policies is most likely to increase output? fiscal policy monetary policy --- --- --- A decrease budget deficit decrease interest rates B decrease budget…

What would reduce the effectiveness of a supply-side stimulus to the economy? A an imposition of maximum hours in a working week B an increase in public sector spending C the…

Increased borrowing by the government results in higher interest charges and this leads to less private investment expenditure. Of what is this an example? A an automatic…

Governments set economic policy aims. What will be least likely to occur if all these aims are achieved? A a decrease in the average standard of living B a decrease in the…

The government decides to raise the rate of value added tax (general sales tax). What does this suggest is the government’s main macroeconomic objective? A to reduce the budget…

A government wishes to support growth in the economy's fishing industry. Which policy is likely to achieve sustainable growth in the fishing industry? A giving more modern fishing…

What is the most effective policy a government could introduce to reduce frictional unemployment? A cut welfare spending on benefits B improve information about job vacancies C…

Which combination of policies is most likely to increase output? fiscal policy monetary policy --- --- --- A decrease budget deficit decrease interest rates B decrease budget…

What would reduce the effectiveness of a supply-side stimulus to the economy? A an imposition of maximum hours in a working week B an increase in public sector spending C the…

An increase in a government's budget surplus will increase unemployment in the short run but it will make it easier to control a balance of payments deficit on the current account…

Evaluate the effectiveness of using monetary policy to reduce the rate of inflation and how this policy may affect a government's ability to achieve its other macroeconomic aims.…

An increase in a government's budget surplus will increase unemployment in the short run but it will make it easier to control a balance of payments deficit on the current account…

The table shows the tax an individual would pay at different levels of income. annual income ($) tax paid ($) --- --- 20 000 1 000 30 000 3 000 40 000 6 000 50 000 8 000 60 000 12…

The government of a country plans to raise income tax rates. The initial equilibrium for the country is represented by point X on the diagram. [Diagram: axes 'price level'…

Which combination would represent the most expansionary set of monetary policies? credit availability interest rates money supply --- --- --- --- A increased up reduced B…

A government increases the rate of income tax. What is the effect, in the short run, on the aggregate demand curve or the aggregate supply curve? A The aggregate demand curve…

Which supply-side measure is most likely to produce short-run growth in a country’s aggregate supply? A easing of controls on immigration of workers B expenditure on primary…

A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country’s aggregate demand (AD)…

A government reduces the rate of tax firms are charged on their land and buildings. How is this likely to affect the economy’s price level and real output? price level real output…

The diagram shows the long-run aggregate supply (LRAS) and aggregate demand (AD) curves for an economy. On the diagram the vertical axis is the price level and the horizontal axis…

The government undertakes a policy of financing training and retraining for unemployed workers. Which terms are most likely be used to classify this policy? demand-side…

Which combination of initial equilibrium and supply-side policy is likely to be least effective when attempting to increase the real output of an economy? initial equilibrium real…

A government aims to reduce unemployment through expansionary fiscal policy and borrows more from the commercial banks, increasing its borrowing requirement. What will be the…

A government wants to use an expansionary monetary policy. What should the government increase? A credit regulations B the exchange rate C the interest rate D the money supply

Explain the reasons why governments impose taxes and consider whether an increase in income tax is fairer than an increase in sales taxes.

Explain how import tariffs might correct an imbalance in the current account of the balance of payments and consider whether these tariffs are the best way of correcting such an…

What is likely to result if a government introduces a new regressive tax? A Aggregate demand will increase. B Employment opportunities will increase. C Income equality will…

Which government policy to counter the effects of income inequality is correctly matched with one of its advantages and one of its disadvantages? policy advantage of policy…

What shows the correct outcome for the policy option? policy option outcome --- --- --- A depreciation of the exchange rate encourages more exports, which also means greater…

The Laffer curve shows expected tax revenues at different tax rates. [Diagram: the vertical axis is tax revenue and the horizontal axis is tax rate / %. An inverted-U…

A government wishes to improve the income distribution between the richest and poorest in society. It introduces means tested benefits for workers on low incomes. To pay for this,…

What is likely to be the effect of an increase in the budget deficit? A an increase in effective demand B an increase in unemployment C a reduction in inflation D a reduction in…

Which policy measure to encourage economic growth might be based on the concept of the Laffer curve? A cuts in direct taxes B exchange rate depreciation C investment subsidies D…

What is a government macroeconomic aim? A a fall in the general price level of goods and services B an increase in monopoly regulation C lower taxes on consumer goods D a minimum…

Assess the extent to which monetary policy can be used effectively to solve the problem of unemployment.

With the help of a diagram, assess the effectiveness of using fiscal policy to close a negative output gap in an economy [20]