Fiscal policy

In January 2013, the Portuguese Government raised tax rates. Three months later, it reduced spending on health care and education. Unemployment in Portugal increased between those two periods.

May/June 2015

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

May/June 2016

A government chooses to alter two of its taxation policies. It cuts the petrol tax and increases the food tax. How will these changes influence how regressive the taxes are?

May/June 2016

The table presents a government’s receipts from taxation. What is the total revenue raised through indirect taxes?

May/June 2016

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

May/June 2016

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

May/June 2016

The table displays a government’s tax receipts. What is the total amount of revenue generated by indirect taxes?

May/June 2016

Burundi is a country in Sub-Saharan Africa. In 2013 the government of Burundi introduced 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 their tax revenue so that they have more funds available to spend on reducing poverty. However, there is disagreement about whether adding more taxes or removing some taxes is more beneficial for an economy.

May/June 2016

In what circumstances is a tax progressive?

May/June 2017

The charts concern 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 for one 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 progressive?

May/June 2017

The details below relate to an economy over one financial year. Government expenditure = $2866$ million; government revenue = $1940$ million. What was the budget balance of the government in that year?

May/June 2017

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

May/June 2017

The table gives the tax payable at different weekly income levels. Which statement describes the income tax system as income increases over this range?

May/June 2018

A government’s revenue is given below. corporation profits tax: $20$ ($\$m$) inheritance tax: $30$ ($\$m$) duty on imports: $40$ ($\$m$) income tax: $50$ ($\$m$) sales tax (VAT): $200$ ($\$m$) Calculate the total indirect tax revenue.

May/June 2018

A government raises the income tax rate so that it can finance additional transfer payments, such as cash benefits for poor people. What has to happen as a consequence of this?

May/June 2019

In a country, the standard rate of Value Added Tax (sales tax) is $20\%$. Different consumers who purchase the same product must each pay the same tax amount. What kind of tax is this?

May/June 2019

The government raises taxation to finance a rise in spending on training schemes run by the government. Which policy combination does this describe?

May/June 2019

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

May/June 2021

A government’s revenue increased by $8\%$ to $\$3.25$ trillion, while its expenditure fell 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

An economy is facing unemployment. It applies a progressive income tax policy and provides benefits for the poor. The government wants to raise employment and narrow income inequality. Which fiscal policy measures are most likely to meet these aims?

May/June 2021

Give one example of a fiscal policy measure.

May/June 2022

A government is aiming to cut both its budget deficit and the level of poverty within its country. Which fiscal policy measure is most likely to help achieve both of these objectives?

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

What is the most probable reason for increasing government subsidies?

May/June 2023

A large number of people from the Philippines are employed in other countries, often in sectors that supply merit goods and public goods. In 2020, the Philippine government collected greater tax revenue. Some of this was used for policies aimed at raising life expectancy and some for policies aimed at cutting unemployment. The country’s unemployment rate was also influenced by an increase in the country’s foreign exchange rate.

May/June 2023

The table gives the income tax rate paid by workers at different income levels in selected years for a developed economy. Which economic objective was the government most likely aiming to achieve when it changed the tax rates between year 1 and year 2?

May/June 2024

During 2020, gold prices declined in Vietnam. In that year, Vietnam ranked among Asia’s strongest-performing economies. Unlike several Asian economies, Vietnam did not go into recession. Its overall output, exports and imports all rose. Unemployment did rise from 2.0% to 2.3% but still stayed very low. One aim of fiscal policy may be to reach full employment.

May/June 2024

Study the source material thoroughly before you answer Question 1. Source material: The difficulties facing the Tunisian government Tunisia fact file For several years, Tunisia had a government budget deficit. From 2015 to 2020, the Tunisian government introduced reforms intended to cut the tax burden, depend more heavily on indirect taxes and make the tax system more efficient and more economical. In addition to taxing a variety of products, the Tunisian government also controls the prices of some goods, such as flour and milk. Keeping the prices of flour and milk under government control 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 movement in the price of electricity influences the costs faced by other firms. This type of government expenditure can help to ease inflationary pressure, although it may also influence how efficiently electricity is produced. Although some firms gain from the subsidy for electricity production, they also go through periods in which their other production costs rise. Tunisian shoe producers 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. Unemployment has been a difficulty in Tunisia for many years. In 2020, the government passed a law promising that workers who had been unemployed for ten years or more would be taken on by the public sector. To reduce the time spent moving from one job to another, it expanded labour market information available to workers and employers and did not increase unemployment benefit in line with inflation. The Tunisian foreign exchange rate moved up and down in 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 percentage of income collected by a tax at different income levels. Which term is used to describe this tax?

May/June 2025

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

May/June 2025

During 2023, India became the most populous country. This could influence the government’s macroeconomic aims. In 2018, the Indian Government reduced the nation’s corporation (corporate income) tax rate from 35% to 25%. From 2019 to 2022, India’s inflation rate averaged 6%. Some economists argued that, in order to meet its central inflation rate target, the government should reduce its spending.

May/June 2025

During 2013, a government aimed to hold inflation down while also reducing unemployment. It chose to subsidise consumers who wanted to buy a house, so that houses would be more affordable for them. At that time, there was a shortage of houses. What is most likely to have happened to inflation, housebuilding and unemployment?

Oct/Nov 2015

The Netherlands has a very high Human Development Index (HDI) score and a high Gross Domestic Product (GDP). A recession in 2012 led consumer expenditure to decline. This created a gap between government spending and tax revenue. To eliminate the gap, the Netherlands’ Government reduced its spending. It might have used monetary policy to boost economic growth and increase tax revenue.

Oct/Nov 2015

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

Oct/Nov 2016

A government provides state benefits for unemployed people and raises the top rate of income tax in order to fund these benefits. What impact will these changes have on poverty and the tax system?

Oct/Nov 2016

In Germany, tax revenue collected from direct and indirect taxes climbed to US$860 billion in 2013. This rise was mainly caused by lower unemployment. Germany operates a progressive tax system. During 2014, German politicians debated whether tax rates ought to be raised. Any change in tax rates affects how much tax revenue is collected and also the structure of the tax system.

Oct/Nov 2016

A new tax is imposed by the government. It raises the price of every $\$10$ good by $\$1$ and the price of every $\$20$ good by $\$2$. What inference can be made about the type of this tax?

Oct/Nov 2017

A worker has an annual income of $\$40{,}000$ and is charged $20\%$ income tax. He buys electrical goods costing $\$5{,}000$ and a car costing $\$10{,}000$, with $20\%$ sales tax paid on both purchases. 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

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

Oct/Nov 2017

In one year, a government receives the following revenue. 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 amount of indirect tax revenue?

Oct/Nov 2017

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

Oct/Nov 2018

The table indicates how the tax paid changes as income increases in four countries, A-D. Which country uses 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 have balanced its budget?

Oct/Nov 2018

In 2016, the Indonesian government stepped up spending on healthcare and education and also looked at increasing the school leaving age. It likewise intended to raise taxation. That decision could clash with its objective of cutting unemployment, at a moment when several countries were in danger of sliding into recession.

Oct/Nov 2018

Which mix of policy measures would be effective at reducing the effects of a recession?

Oct/Nov 2019

A government plans to raise tax income from consumer spending. Which tax would it raise?

Oct/Nov 2019

The table presents tax paid at a range of income levels within an economy. Which description of the tax system in use is correct?

Oct/Nov 2019

The table illustrates the tax an individual would pay at various levels of disposable income. Which type of tax is shown in the table?

Oct/Nov 2020

The table presents the unemployment rate and real GDP growth for an economy in 2014 and 2018. Which mix of policy measures would be most effective in bringing the economy back to the 2014 level of economic activity?

Oct/Nov 2020

An economy is facing increasing prices. Which government policy would help to lower consumer spending?

Oct/Nov 2020

Because the number of retired people has increased, demand for certain government expenditure has risen. Which type of government expenditure is most likely to be affected directly?

Oct/Nov 2020

An economy is facing increasing prices. Which government policy will help lower consumer expenditure?

Oct/Nov 2020

The table sets out a government’s receipts from taxation. What is the total amount of revenue raised through indirect taxes?

Oct/Nov 2021

The table presents a government’s tax receipts. What is the total revenue generated by indirect taxes?

Oct/Nov 2021

Which two items are part of a government budget?

Oct/Nov 2022

The table sets out the rate of income tax paid across different income levels. What type of tax is this?

Oct/Nov 2022

A government chooses to stimulate the economy by using a budget deficit. Which target should it select to achieve this aim?

Oct/Nov 2022

A government chooses to apply a fiscal policy measure. What would be one example of this?

Oct/Nov 2022

What would the government cut back on in order to lower inflation?

Oct/Nov 2022

What is one example of a government macroeconomic policy?

Oct/Nov 2023

Which alteration to fiscal policy is most likely to lower cyclical unemployment in an economy?

Oct/Nov 2023

The table presents government spending and income in chosen years. What could account for the changes in the government’s budget across the period?

Oct/Nov 2024

The table presents earnings and the total income tax paid each year. Which kind of tax system is shown by this?

Oct/Nov 2024

In one year, a government receives the following revenue: taxes on goods = $30\text{ m}$, taxes on income = $500\text{ m}$, taxes on services = $20\text{ m}$, customs and excise duties = $50\text{ m}$. What is the total indirect tax revenue?

Oct/Nov 2025

Which policy measures would count as fiscal policy?

Oct/Nov 2025

Which item is unlikely to appear in a government budget?

Oct/Nov 2025

Which mix of policy actions is most likely to raise aggregate demand in an economy?

Oct/Nov 2025