It is thought that around half of Egyptian men smoke, a figure that is among the highest in the world. Over recent years, the Egyptian government has raised the cigarette tax. The government and the central bank have also attempted to bring inflation down and strengthen Egypt’s performance in international trade. The Egyptian government could use subsidies to cut its deficit on the current account of its balance of payments.
(a)[2]
Identify two characteristics of a good tax.
(b)[4]
Explain two reasons why governments impose taxes on cigarettes.
(c)[6]
Analyse how a central bank might reduce inflation.
(d)[8]
Discuss whether higher government subsidies will or will not reduce a deficit on the current account of the balance of payments.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Certainty - simple to see how much must be paid” …