Fiscal policy

Assuming everything else remains unchanged, what is likely to reduce public spending?

Feb/March 2016

At what point does a tax become regressive?

Feb/March 2016

Which item is not an expenditure of the public sector?

Feb/March 2017

The Indian government makes use of both direct taxation and indirect taxation. Which one is a direct tax?

Feb/March 2017

A worker receives $60000 each year and pays $25\% income tax. He spent $2000 on furniture and $5000 on a computer, and he paid $20\% sales tax on each. How much indirect tax did he pay?

Feb/March 2017

Workers' earnings affect the standard of living they can afford. Some workers are paid comparatively little. Governments have several methods of helping those on low pay.

Feb/March 2017

Which outcome is most likely to follow an increase in income tax?

Feb/March 2018

Which statement best defines a progressive tax?

Feb/March 2018

Which pair of government measures combines one fiscal policy with one supply-side policy?

Feb/March 2018

Which combination of changes in a government budget will result in higher income inequality?

Feb/March 2018

In March 2016, the Canadian government said it would raise government spending, including a larger subsidy for environmentally friendly technology. It also stated that the highest income-tax rate for high-income earners would rise from 29% to 33%. Changes in government spending and taxation affect a country’s inflation rate.

Feb/March 2018

State one example of an expansionary fiscal policy.

Feb/March 2019

In 2016, the Chinese government overhauled the Chinese tax system. It broadened VAT (sales tax) from sales of goods to sales of services, which allowed the corporation tax rate to be cut. Taxes on goods and services are usually regressive. The Chinese government aimed to improve living standards and expected that lowering the tax rate paid by firms would make the country more attractive to multinational companies (MNCs).

Feb/March 2020

What does a government’s budget contain?

Feb/March 2021

A tax of $1.45\%$ is levied on every wage earned to finance basic medical provision. How would this tax be described?

Feb/March 2021

The table gives taxes as a percentage of Gross Domestic Product (GDP) for four countries. Using this data, which country had the largest percentage of direct taxation as a percentage of GDP?

Feb/March 2023

By 2019, India had become the largest producer of sugar in the world. In India, sugar cane is cultivated by many mostly low-income farmers. They sell sugar cane to mills, and those mills turn the sugar cane into sugar. Compared with growing it, processing the sugar cane is more capital-intensive. The Indian government fixes a minimum price for sugar cane and subsidises the export of sugar.

Feb/March 2023

An economy is going through deflation, with output falling and unemployment increasing. Which policy measure would the government be most likely to use to correct this?

Feb/March 2024

Several firms in Monaco have already expanded through external growth. Wages in Monaco are high. Workers there also gain from fiscal policy that helps to keep employment high. The government does charge VAT on food, including fruit. Some economists have argued that, rather than taxing fruit, governments ought to give consumers free fruit.

Feb/March 2024

What does the term government budget mean?

Feb/March 2025

A government chooses to raise defence spending and cut direct taxes. What kind of policy is this?

Feb/March 2025

Which policy combination will have the biggest effect on raising the amount of total spending in the economy?

May/June 2015

A toy manufacturer purchased a $750\,000 consignment of raw plastic from a local supplier and turned it into toys. The toys generated total revenue of $1\,000\,000. The government required the company to pay tax on this transaction. Which tax is the company most likely to have to pay?

May/June 2015

Domestic consumption in an economy decreased. What could have lessened the effect of this decline on the economy?

May/June 2015

In January 2013, the Portuguese Government raised tax rates. After three months, it reduced spending on health care and education. In the period between these two changes, unemployment in Portugal increased.

May/June 2015

A state administration wants to encourage economic recovery. Which measure would help with this?

May/June 2016

The table gives a government’s revenue from taxation. What is the total amount of revenue collected from indirect taxes?

May/June 2016

A government wants to encourage economic recovery. Which measure will help with this?

May/June 2016

A government sets income tax at $0.20$ for each dollar earned. Which term describes this form of taxation?

May/June 2016

A government wants to encourage economic recovery. Which action would help achieve this?

May/June 2016

The table gives a government’s tax receipts. air passenger duty $10\text{m}$ company profits tax $100\text{m}$ import duty $75\text{m}$ income tax $200\text{m}$ inheritance tax $50\text{m}$ sales tax (VAT) $300\text{m}$ What is the total revenue generated by direct taxes?

May/June 2016

Burundi lies in Sub-Saharan Africa. In 2013 the government of Burundi brought in VAT, an indirect tax, while cutting corporation tax (the tax on firms’ profits) from 35% to 30%. The United Nations has urged Sub-Saharan African countries to raise tax revenue so that more money is available for spending on reducing poverty. However, there is debate over whether adding more taxes or removing some taxes is more advantageous for an economy.

May/June 2016

In 2014 Brazil’s inflation rate was rising while its unemployment rate was falling. In that year, government spending rose by 16% whereas tax revenue dropped by 8%. Consequently, the country’s budget deficit got larger.

May/June 2016

In what circumstances is a tax progressive?

May/June 2017

The charts are based on the Financial Statement of the government of New Zealand for 2014. What conclusion can be drawn?

May/June 2017

The details below relate to an economy during a financial year. government expenditure = $2866 million government revenue = $1940 million What budget balance did the government record in that year?

May/June 2017

The government raises the income tax rate and lowers the rate of sales tax (VAT). Starting from the original equilibrium at $X$, which letter marks the new equilibrium point in the market for normal goods?

May/June 2017

At what point is a tax considered progressive?

May/June 2017

The details below relate to an economy in a financial year. Government expenditure = $2866 million. Government revenue = $1940 million. What was the government's budget balance in that year?

May/June 2017

At what point is a tax described as progressive?

May/June 2017

Why may government spending be referred to as both a fiscal policy and a supply-side policy?

May/June 2017

A government reduces the income tax rate. What effect is this likely to have on tax evasion and revenue from indirect taxes?

May/June 2017

The data below describe an economy over one financial year. government expenditure = $2866 million government revenue = $1940 million What budget balance did the government record in that year?

May/June 2017

Prices in Mexico have risen in recent years. Indirect taxes have also been increased. Bus fares and food have become more expensive. In 2015, the Mexican Government planned to reduce its spending by US$8.3 billion.

May/June 2017

A government records the following sources of revenue. What is the total amount of indirect tax revenue?

May/June 2018

A government wants to transfer income from richer people to poorer people. Which mix of policy measures is most likely to achieve this objective?

May/June 2018

Several governments are introducing taxes on unhealthy food and drinks. These taxes are generally regressive. In addition, some of these governments are raising spending on healthcare. In other nations, healthcare is supplied by the private sector. The number of state-owned enterprises is falling in many countries because of privatisation.

May/June 2018

California in the USA has the most progressive tax system. This tax structure helps to cut high poverty rates. Policymakers are thinking about changing sales tax in the state so that services are included, while relying less on direct taxes.

May/June 2018

A government raises the rate of income tax to fund extra transfer payments, including cash benefits for the poor. What must happen as a consequence of this?

May/June 2019

In a country, the standard Value Added Tax (sales tax) rate is $20\%$. Every consumer who purchases the same product pays the same tax amount. What type of tax is this?

May/June 2019

The government raises taxation so that it can finance a rise in spending on government training schemes. Which combination of policies does this describe?

May/June 2019

Which type of tax always takes a larger proportion of the taxpayer’s income as income rises?

May/June 2019

An economy is experiencing a high inflation rate. In reaction to this, the government raises income tax. What is the most likely reason for this rise?

May/June 2021

A government’s revenue rose by $8\%$ to $\$3.25$ trillion, while its expenditure was cut to $\$3.69$ trillion. What conclusion can be drawn from this?

May/June 2021

What does the term fiscal policy measure mean?

May/June 2021

A nation is dealing with unemployment. It has a progressive income tax policy and benefits for the poor. The government wants to raise employment and cut income inequality. Which fiscal policy measures are most likely to meet these aims?

May/June 2021

What does fiscal policy mean?

May/June 2021

The table presents the sources of government revenue for an economy. What is the total tax revenue collected from direct taxes?

May/June 2021

State one example of a fiscal policy measure.

May/June 2022

A government chooses not to alter direct taxes, but instead raises indirect taxes. What is this policy designed to achieve?

May/June 2023

A government wants to encourage economic recovery. Which action would help achieve this?

May/June 2023

A large number of people from the Philippines are employed in another country, often in industries that supply merit goods and public goods. In 2020, the Philippine government collected more tax revenue. Part of this was used on policy measures to raise life expectancy and part on policy measures to reduce unemployment. The country’s unemployment rate was also influenced by an increase in the country’s foreign exchange rate.

May/June 2023

The table sets out the income tax rate paid by workers at various income levels in selected years in a developed economy. What economic objective was the government most likely trying to achieve by altering the tax rates between year 1 and year 2?

May/June 2024

What is the most likely effect of reduced direct taxes on demand and supply?

May/June 2024

During 2020, the price of gold declined in Vietnam. In that year, Vietnam was among Asia’s strongest-performing economies. In contrast with some other Asian economies, Vietnam did not go into recession. Total output, exports and imports all rose. Unemployment did rise from 2.0% to 2.3% but it still stayed very low. One possible aim of fiscal policy is to reach full employment.

May/June 2024

Study the source material closely before you answer Question 1. Source material: The difficulties facing the Tunisian government Tunisia fact file For several years, Tunisia ran a government budget deficit. From 2015 to 2020, the Tunisian government introduced reforms designed to cut the tax burden, depend more heavily on indirect taxes, and make the tax system more efficient and less costly. In addition to taxing a variety of goods, the Tunisian government also controls the prices of some products, such as flour and milk. State regulation of the price of flour and milk can help to lower poverty and stop monopoly firms using their market power to exploit consumers. The Tunisian government also provides subsidies for electricity production. The subsidy changes the cost of producing electricity, and any change in the price of electricity affects the costs faced by other firms. This kind of public spending can help ease inflationary pressure, but it can also reduce the efficiency of electricity production. Although some firms gain from the subsidy on electricity production, they also go through periods when their other production costs rise. Tunisian shoe manufacturers have recently faced higher wage costs and a fall in the number of workers they employ. The average wage paid to Tunisian workers and the Tunisian inflation rate changed between 2014 and 2020, as shown in Fig. 1.1. Fig. 1.1 is a line graph with the title: "Change in average wage and the inflation rate in Tunisia 2014-2020". The vertical axis is labelled: "Percentage (%)" and extends from 0 to 9. The horizontal axis is labelled: "Year" and includes 2014, 2015, 2016, 2017, 2018, 2019 and 2020. The key shows a solid line labelled: "Change in average wage" and a dashed line labelled: "Inflation rate". Unemployment has been a long-standing issue in Tunisia. In 2020, the government introduced a law that guaranteed public-sector jobs for workers who had been unemployed for ten years or longer. To cut the time workers spend moving from one job to another, it improved the labour market information available to workers and employers and did not increase unemployment benefit in line with inflation. Tunisia’s foreign exchange rate moved around during 2020. This influenced the prices of the country’s exports and imports. It also affected the current account of its balance of payments, economic growth, inflation and unemployment.

May/June 2024

What does the term principle of taxation mean?

May/June 2025

The diagram illustrates the proportion of income collected by a tax at various income levels. Which term is used to name the tax?

May/June 2025

Which of the following is not a probable result of an increase in the budget deficit in a year?

May/June 2025

In a country, some well-paid workers cut back their working hours because income tax rates are very high at higher income levels. What is one disadvantage of this income tax?

May/June 2025

The diagram illustrates the proportion of income collected by a tax at various income levels. What term is used to describe this tax?

Oct/Nov 2015

The diagram illustrates the introduction of a tax of UZ on a good. Which area represents the government’s tax revenue?

Oct/Nov 2015

During 2013, a government aimed to keep inflation low and to reduce unemployment as well. It chose to subsidise consumers who wanted to buy a house so that houses would become more affordable for them. At the same time, there was a shortage of houses. What is most likely to have happened to inflation, housebuilding and unemployment?

Oct/Nov 2015

The table gives tax figures as a percentage of Gross Domestic Product (GDP) for four countries. Income tax ($\%$), tax on business profits ($\%$), tax on dividends ($\%$), tax on goods and services ($\%$): A: $12, 14, 2, 5$ B: $14, 15, 2, 14$ C: $17, 13, 5, 10$ D: $18, 10, 1, 10$ From this data, which country had the greatest share of direct taxation as a percentage of GDP?

Oct/Nov 2016

A government brings in state benefits for people without jobs and raises the highest rate of income tax to fund those benefits. What impact will these changes have on poverty and the tax system?

Oct/Nov 2016

A government chooses to raise the income tax rate and use the additional revenue to fund training colleges. How could this be described?

Oct/Nov 2016

The table gives taxes as percentages of Gross Domestic Product (GDP) for four countries. Using this information, which country had the smallest percentage of direct taxation as a proportion of GDP?

Oct/Nov 2016

In Germany, tax revenue from direct and indirect taxes climbed to US$860 billion in 2013. This rise was mainly the result of lower unemployment. Germany uses a progressive tax system. In 2014, German politicians debated whether tax rates ought to be raised. Altering tax rates affects both the level of tax revenue collected and the type of tax system.

Oct/Nov 2016

The graph illustrates the percentage of income paid as taxation. Which line shows a proportional tax?

Oct/Nov 2017

A government brings in a fresh tax. It increases the price of each $\$10$ good by $\$1$ and the price of each $\$20$ good by $\$2$. What conclusion can be drawn about the character of this tax?

Oct/Nov 2017

A worker receives $\$40\,000$ per year and is charged $20\%$ income tax. He buys electrical goods worth $\$5000$ and a car for $\$10\,000$, with $20\%$ sales tax added to each purchase. What total indirect tax does he pay?

Oct/Nov 2017

Which policy is most likely to raise the level of economic activity?

Oct/Nov 2017

In one year, a government raises the revenue shown below. customs duties: $100\,\text{m}$ taxes on goods: $200\,\text{m}$ taxes on income: $400\,\text{m}$ taxes on services: $300\,\text{m}$ What is the total indirect tax revenue?

Oct/Nov 2017

Indonesia has abundant resources, including raw materials such as copper, gold and coal. Indonesia is the second-largest coal exporter. In 2015, the Indonesian Government was thinking about raising subsidies for producers, farmers included. Subsidies may be used to bring inflation down. In recent years, direct taxes have been lower in Indonesia, whereas some other countries have raised indirect taxes.

Oct/Nov 2017

In June 2015, trade unions in Argentina were calling for higher wages and lower taxes. Alongside the push for wage increases, the economy was dealing with several further difficulties. It was also seeking to encourage the creation of public limited companies and stronger economic growth.

Oct/Nov 2017

State one disadvantage of direct taxes.

Oct/Nov 2018

At what point is a government said to have balanced its budget?

Oct/Nov 2018

At what point is a government said to balance its budget?

Oct/Nov 2018

The table compares how much tax is paid as income increases in four countries, A-D. Which country has a progressive tax?

Oct/Nov 2018

Which of the following is most likely to be an example of a progressive tax?

Oct/Nov 2018

At what point is a government said to balance its budget?

Oct/Nov 2018

In 2016, the Indonesian government raised its spending on healthcare and education and was considering an increase in the school leaving age. It also intended to raise taxation. This policy could run against its aim of lowering unemployment at a time when several countries were at risk of moving into a recession.

Oct/Nov 2018

Which measures would be likely to raise government spending and cut tax revenue?

Oct/Nov 2019

The diagram illustrates the effect of a government levying an indirect tax on a good. The initial demand curve is $D_1$ and the initial supply curve is $S_1$. What total tax revenue does the government obtain?

Oct/Nov 2019

Why are indirect taxes, such as VAT of $20\%$ on goods and services, regarded as regressive when high-income and low-income purchasers are compared?

Oct/Nov 2019

Which mix of policy measures would be effective in lowering the impact of a recession?

Oct/Nov 2019

Under which category would government spending on education be placed?

Oct/Nov 2019

A government chooses to raise tax revenue from consumer spending. Which tax will it raise?

Oct/Nov 2019

The table gives the tax paid at different income levels in an economy. Which description of the tax system used is correct?

Oct/Nov 2019

Which indicator would show that the government is using an expansionary fiscal policy?

Oct/Nov 2020