Fiscal policy

During 2009, the Australian government paid $900 to people earning under $100 000 each year. What would be the effect of this transfer payment called?

Feb/March 2016

A government chose to cut income tax and raise sales tax. The starting equilibrium is marked by X on the aggregate demand (AD) and aggregate supply (AS) diagram. Which equilibrium point would result after these tax changes?

Feb/March 2016

What would an expansionary fiscal policy cause to rise?

Feb/March 2016

During March 2014, Sweden recorded a change of –0.6% in its Consumer Price Index. Which mix of policies could the government adopt to bring back price stability?

Feb/March 2016

Which policy is most likely to clash with a government’s objective of price stability?

Feb/March 2016

The diagram provides information on the British Government’s projected expenditure and receipts for 2010–2011. All figures are in UK £bn. What conclusion can be drawn from the diagram?

Feb/March 2016

The diagram presents four potential aggregate supply curves together with an equilibrium point X. A government introduces deflationary fiscal policy to bring down the inflation rate in its economy. As a result, aggregate demand moves to AD2. For which AS curve would this policy be least effective?

Feb/March 2017

A government’s budget is presently balanced. It is examining the possible changes in tax revenue and government expenditure shown below. Which three options are most likely to have the ability to push the budget into surplus? (options: W increase/increase; X increase/reduce; Y reduce/increase; Z reduce/reduce)

Feb/March 2017

In the diagram, the economy starts from equilibrium at point X. The government raises spending on education. This happens at the same time as an increase in wage rate inflation. Which point indicates the economy’s most likely short-run equilibrium?

Feb/March 2018

Which action would be regarded as a fiscal policy measure?

Feb/March 2018

A government wanted to raise demand in an economy in order to cut unemployment. Which policy is most likely to do this?

Feb/March 2018

Distinguish between the transactions demand for money and the speculative demand for money. Decide which of these is likely to matter more for a consumer in a modern economy.

Feb/March 2018

Which action could be included in an expansionary economic policy?

Feb/March 2019

Identify two policies adopted by the Polish government that could be considered as supply-side policies.

Feb/March 2019

Which policy is most likely to raise unemployment?

Feb/March 2019

A government in a developed economy wants to reduce cyclical unemployment. Which policy is likely to be the most effective?

Feb/March 2019

What is one example of a fiscal policy used to raise aggregate demand in an economy?

Feb/March 2020

Explain how an economist would categorise each of these provisions.

Feb/March 2020

Give one example of a Keynesian macroeconomic policy that could lower cyclical unemployment.

Feb/March 2020

‘Monetarists maintain that controlling the money supply is the main way to tackle inflation, whereas Keynesians contend that inflation can only be curbed by controlling expenditure.’ To what extent do you agree that both of these approaches are only partly correct?

Feb/March 2020

The government redistributes income by increasing the highest rate of income tax and then using the revenue collected to pay for extra benefits for students and unemployed people. Under which conditions will total spending in the economy rise by the greatest amount?

Feb/March 2021

A government uses public funds to construct more schools. How would this be classified? (columns: fiscal policy; supply-side policy; monetary policy)

Feb/March 2021

Which combination of policies will cut national income by the largest amount?

Feb/March 2021

What does the term reflationary fiscal measure mean?

Feb/March 2021

To strengthen its financial position, a government chose to cut spending on investment in the public sector. Economic growth did not decrease. What was the most likely effect of the government’s action?

Feb/March 2022

Starting from the equilibrium position illustrated, government spending on goods and services rises while the production costs of goods and services also rise at the same time. Which option most accurately describes the probable effect on the economy?

Feb/March 2022

Use examples to show why the supply of some products is price elastic, whereas the supply of other products is price inelastic.

Feb/March 2022

Which statement would be linked to Keynesian economic theory?

Feb/March 2022

What is shown by the Laffer curve?

Feb/March 2022

Government policies that depend on raising budget deficits to tackle unemployment will not succeed because they leave the natural rate of unemployment unchanged. Discuss the extent to which you agree with this statement.

Feb/March 2022

Which item is least likely to increase because expansionary fiscal policy is used?

Feb/March 2023

Which set of conditions is most likely to cause a rise in a country’s budget deficit?

Feb/March 2023

Which policy is likely to lead to higher unemployment?

Feb/March 2023

State what is meant by ‘a recession’ in economics.

Feb/March 2023

A government’s budget is balanced. It chooses to raise its spending by 10%. Which rise in government revenue would create a budget surplus?

Feb/March 2024

The diagram illustrates the connection between the income tax rate and tax revenue. Which statement is correct?

Feb/March 2024

Which fiscal policy combination would lower both the inflation rate and income inequality?

Feb/March 2025

How is a progressive tax defined?

Feb/March 2025

Using an AD/AS diagram, explain what is meant by an expansionary fiscal policy and assess how far an expansionary fiscal policy will always raise the level of aggregate demand.

Feb/March 2025

In an economy where there are unemployed resources, the marginal propensity to consume is 0.2. The government raises its budget deficit and covers it by selling bonds to the non-bank private sector. What is the most likely result?

Feb/March 2025

Using a diagram, assess the effectiveness of government policies that could be used to reduce demand-pull inflation.

Feb/March 2025

Explain the meaning of the statement above.

May/June 2005

Budget deficits are influenced by fiscal policy. Explain how multiplier analysis might be used to forecast the effects of changes in fiscal policy.

May/June 2007

How far do you agree with the view that the principal objectives of economic government policy should be low unemployment and low tax rates?

May/June 2007

There is concern that if the government raises taxes, national income will decrease. Explain whether this must always be the case.

May/June 2008

Explain the effect on national income when spending on infrastructure increases.

May/June 2009

An economy is below full employment equilibrium when national income is $40 000 million and government spending is $15 000 million. For each extra $100 added to national income, $15 goes in taxes, $30 is spent on imports and $5 is saved. If national income is to be increased to the full employment level of $50 000 million, to what level must the government increase its own spending?

May/June 2010

In an economy with underemployed resources, which way of financing a rise in government expenditure is most likely to produce the largest expansionary effect?

May/June 2010

What effect will a rise in marginal tax rates have?

May/June 2010

If national income is $40 000 million and government spending is $15 000 million, the economy is at equilibrium but remains below full employment. For each rise of $100 in national income, $15 goes in taxes, $30 is used on imports and $5 is saved. In order to lift national income to the full employment level of $50 000 million, to what level must the government increase its own spending?

May/June 2010

The economy is operating with underemployed resources. Which way of financing a rise in government expenditure is most likely to create the biggest expansionary effect?

May/June 2010

What impact would an increase in marginal tax rates have?

May/June 2010

If national income is $40 000 million and government spending is $15 000 million, the economy is in equilibrium but still below full employment. For every $100 increase in national income, $15 is paid in taxes, $30 is used on imports and $5 is saved. To increase national income to the full employment level of $50 000 million, to what level will the government have to raise its own spending?

May/June 2010

An economy is operating with underemployed resources. Which way of financing a rise in government expenditure is most likely to create the largest expansionary effect?

May/June 2010

What effect will a rise in marginal tax rates have?

May/June 2010

A firm undertakes a major investment. Analyse why the rise in national income from this investment could be greater in a closed economy with no government than in an open mixed economy.

May/June 2010

The diagram illustrates a government’s revenue and expenditure across three years. What conclusion can be drawn from the diagram?

May/June 2011

The diagram presents a government’s revenue and expenditure over three years. What conclusion can be drawn from the diagram?

May/June 2011

Individuals can decide how many hours they work, how much income they save and which goods and services they purchase. Which type of tax will not distort the choices people make?

May/June 2011

The diagram displays a government’s revenue and expenditure over three years. What conclusion can be drawn from the diagram?

May/June 2011

Explain the meaning of a recession.

May/June 2011

Because of a cyclical downturn, a government is facing a budget deficit. If the government wants to boost aggregate demand, which policy would be the most effective?

May/June 2012

The government of Lesotho launches a programme designed to raise exports and help firms expand by subsidising local entrepreneurs. What effect is this likely to have on incomes, the current account deficit in the balance of payments and government expenditure in Lesotho?

May/June 2012

Because of a cyclical slump, a government has a budget deficit. If it wants to boost aggregate demand, which policy would be the most effective?

May/June 2012

A government deals with cyclical changes in output by leaving tax rates and benefit rates unchanged. What is the government aiming to achieve by using this fiscal policy?

May/June 2012

What is likely to happen to demand-pull inflation and cost-push inflation if indirect taxes rise?

May/June 2013

Which set of conditions is most likely to cause a country’s budget deficit to rise?

May/June 2013

Under which situation will a rise in the public sector deficit fail to cause any increase in the money supply, assuming all other factors remain unchanged?

May/June 2013

What must a government do in order to keep its budget balanced?

May/June 2013

What factors would make the multiplier effect of a rise in government spending on national income larger?

May/June 2013

If government policy remains unchanged, what effect would an economic recession have on tax revenue and government expenditure?

May/June 2013

Which set of conditions would be most likely to make a country’s budget deficit increase? (total GDP, unemployment, discretionary government spending)

May/June 2013

Under what circumstance will a rise in the public sector deficit not result in a rise in the money supply, with all other factors unchanged?

May/June 2013

What must a government do to keep its budget balanced?

May/June 2013

The table sets out a government’s expenditure and tax revenues during 2010-2013. What effect did the shifts in the government’s fiscal balance have on the national debt and on aggregate expenditure?

May/June 2014

If a government raises the unemployment benefit rate, which diagram illustrates the resulting shift in the consumption function from C1 to C2?

May/June 2014

Which mix of fiscal policy and monetary policy could be used to lower both unemployment and the government budget deficit in an economy?

May/June 2014

What impact will an increase in marginal tax rates have?

May/June 2014

The table presents a government’s spending and tax receipts across 2010-2013. How did the shifts in the government’s fiscal balance affect the national debt and aggregate expenditure?

May/June 2014

Which mix of fiscal policy and monetary policy could be used to lower both unemployment and the government budget deficit in an economy?

May/June 2014

Explain the possible causes of unemployment and explain which one accounts for most unemployment in your country.

May/June 2014

The diagram compares an economy’s actual output with its expected output. What would assist in reducing the gap between actual output and expected output?

May/June 2015

In a fixed exchange rate economy, which policy mix is most likely to be effective in dealing with both a widening current account deficit in the balance of payments and increasing inflationary pressure?

May/June 2015

The table presents details of a government’s budget for two years. 2012/13 government revenue $2 630 000m; government spending $3 000 300m. 2013/14 government revenue $3 730 000m; government spending $3 770 000m. What change took place in government finances between 2012/13 and 2013/14?

May/June 2015

If national income falls and the government then raises its expenditure, financing the extra spending by selling bonds to the non-bank private sector, what is likely to be one consequence of this policy?

May/June 2015

When the government borrows more, interest charges rise and private investment expenditure falls as a result. What is this an example of?

May/June 2015

If a government’s budget is balanced when the economy is fully employed, but an aggregate demand shock leads to a fall in national income, what outcome will follow if the government leaves its tax rates and level of spending unchanged?

May/June 2015

In 2013, a new aircraft, the Boeing 787 Dreamliner, was assembled in the United States (US). United Airlines, an American private company, placed an order for 50 of these aircraft, with each one costing more than US$200 million. Suppose the US were a closed economy with no government intervention. Analyse why the rise in national income from this investment in new aircraft could be different from what would happen in an open, mixed economy.

May/June 2015

What is a recession and is it always triggered by weak consumer spending?

May/June 2015

Briefly explain how monetary policy, fiscal policy and supply-side policy differ, and state whether their effects overlap.

May/June 2015

A country is dealing with two issues at once: deflation and a current account deficit in the balance of payments. It chooses to create a budget deficit and reduce interest rates. What effects are these policies likely to have on the two problems?

May/June 2016

How did the balance on Turkey’s current account change between 2012 and 2013?

May/June 2016

Which pairing of fiscal policy measures would be most effective in lowering income inequality?

May/June 2016

At what point would an economic recession cause a government’s budget deficit to increase?

May/June 2016

Which factor will make the multiplier effect of a rise in government spending on national income larger?

May/June 2016

It has been claimed that if income tax rates levied on individuals rise from zero up to 100%, tax revenue first rises, but at some stage it will fall. If this claim is valid, then it follows that

May/June 2016

Equilibrium is a central idea in economics. Explain what the equilibrium level of national income means and discuss the comparative merits of the policies a government could use to bring about a change in the equilibrium level in an open economy.

May/June 2016

Estimated planned UK government spending for the fiscal year 2016 is £760 billion. The table lists the five largest spending categories. What total amount is shown in the table for transfer payments?

May/June 2017

The diagram illustrates a government’s revenue and expenditure over three years. What can be concluded from the diagram?

May/June 2017

The government in a country intends to increase income tax rates. On the diagram, the country’s starting equilibrium is shown at point X. Which different equilibrium point would an economist expect to result?

May/June 2017