Fiscal policy — Paper 3 · A Level Economics 9708

21 The diagram shows a number of expenditure functions. The original expenditure function is shown by E. E1 E2 E E3 expenditure E4 O income The government announces a decrease in government expenditure on goods and services and reduces the standard rate of income tax. Which line shows the new expenditure function resulting from these changes? A E1 B E2 C E3 D E4

1 marks

Answer: B

This question in 9708/31 Oct/Nov 2009

30 A government decides to pursue a more deflationary fiscal policy and a more reflationary monetary policy. Which combination of changes in policy instruments is consistent with this? government interest rate taxation expenditure A decrease decrease increase B decrease decrease decrease C increase increase decrease D increase increase increase

1 marks

Answer: A

This question in 9708/31 Oct/Nov 2009

20 The diagram shows a number of expenditure functions. The original expenditure function is shown by E. E1 E2 E E3 expenditure E4 O income The government announces a decrease in government expenditure on goods and services and reduces the standard rate of income tax. Which line shows the new expenditure function resulting from these changes? A E1 B E2 C E3 D E4

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2009

29 A government decides to pursue a more deflationary fiscal policy and a more reflationary monetary policy. Which combination of changes in policy instruments is consistent with this? government interest rate taxation expenditure A decrease decrease increase B decrease decrease decrease C increase increase decrease D increase increase increase

1 marks

Answer: A

This question in 9708/32 Oct/Nov 2009

27 Which policy is most likely to reduce a balance of payments deficit without causing inflation? A a devaluation of the exchange rate B an increase in import tariffs C an increase in indirect taxes D an increase in direct taxes

1 marks

Answer: D

This question in 9708/31 May/June 2010

29 An economy has underemployed resources. Which method of financing an increase in government expenditure is likely to have the greatest expansionary effect? A borrowing from the central bank B borrowing from the non-bank private sector C increased direct taxation D increased indirect taxation

1 marks

Answer: A

This question in 9708/31 May/June 2010

30 What will be the impact of an increase in marginal tax rates? A an increase in the propensity to save B an increase in the value of the investment multiplier C a strengthening of work incentives D a strengthening in the operation of automatic stabilisers

1 marks

Answer: D

This question in 9708/31 May/June 2010

19 When national income equals $40 000 million and government spending equals $15 000 million, an economy is in equilibrium below full employment. Out of every increase of $100 in national income, $15 is taken in taxes, $30 is spent on imports and $5 is saved. To raise national income to the full employment level of $50 000 million, to which level will the government need to raise its own spending? A $15 500 million B $20 000 million C $25 000 million D $35 000 million

1 marks

Answer: B

This question in 9708/32 May/June 2010

26 Which policy is most likely to reduce a balance of payments deficit without causing inflation? A a devaluation of the exchange rate B an increase in import tariffs C an increase in indirect taxes D an increase in direct taxes

1 marks

Answer: D

This question in 9708/32 May/June 2010

28 An economy has underemployed resources. Which method of financing an increase in government expenditure is likely to have the greatest expansionary effect? A borrowing from the central bank B borrowing from the non-bank private sector C increased direct taxation D increased indirect taxation

1 marks

Answer: A

This question in 9708/32 May/June 2010

29 What will be the impact of an increase in marginal tax rates? A an increase in the propensity to save B an increase in the value of the investment multiplier C a strengthening of work incentives D a strengthening in the operation of automatic stabilisers

1 marks

Answer: D

This question in 9708/32 May/June 2010

26 Which policy is most likely to reduce a balance of payments deficit without causing inflation? A a devaluation of the exchange rate B an increase in import tariffs C an increase in indirect taxes D an increase in direct taxes

1 marks

Answer: D

This question in 9708/33 May/June 2010

28 An economy has underemployed resources. Which method of financing an increase in government expenditure is likely to have the greatest expansionary effect? A borrowing from the central bank B borrowing from the non-bank private sector C increased direct taxation D increased indirect taxation

1 marks

Answer: A

This question in 9708/33 May/June 2010

29 What will be the impact of an increase in marginal tax rates? A an increase in the propensity to save B an increase in the value of the investment multiplier C a strengthening of work incentives D a strengthening in the operation of automatic stabilisers

1 marks

Answer: D

This question in 9708/33 May/June 2010

28 When will taxes be most effective in dampening cyclical changes in national output? A when the tax yield is independent of national income B when the tax yield varies inversely with national income C when the tax yield varies less than proportionately with national income D when the tax yield varies more than proportionately with national income

1 marks

Answer: D

This question in 9708/31 Oct/Nov 2010

29 The government of a country decides to increase the proportion of its tax revenue it obtains from direct taxes and to reduce the proportion it obtains from indirect taxes. What is likely to be the impact on the distribution of income and on work incentives? distribution of work incentives income A less equal decrease B less equal increase C more equal decrease D more equal increase

1 marks

Answer: C

This question in 9708/31 Oct/Nov 2010

28 When will taxes be most effective in dampening cyclical changes in national output? A when the tax yield is independent of national income B when the tax yield varies inversely with national income C when the tax yield varies less than proportionately with national income D when the tax yield varies more than proportionately with national income

1 marks

Answer: D

This question in 9708/32 Oct/Nov 2010

29 The government of a country decides to increase the proportion of its tax revenue it obtains from direct taxes and to reduce the proportion it obtains from indirect taxes. What is likely to be the impact on the distribution of income and on work incentives? distribution of work incentives income A less equal decrease B less equal increase C more equal decrease D more equal increase

1 marks

Answer: C

This question in 9708/32 Oct/Nov 2010

27 When will taxes be most effective in dampening cyclical changes in national output? A when the tax yield is independent of national income B when the tax yield varies inversely with national income C when the tax yield varies less than proportionately with national income D when the tax yield varies more than proportionately with national income

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2010

25 The diagram shows a government’s revenue and expenditure for three years. revenue 2008 expenditure revenue 2009 expenditure revenue 2010 expenditure 0 1 2 3 4 $m What can be concluded from the diagram? A A budget deficit was replaced by a budget surplus. B A government borrowing requirement emerged. C The economy moved from a recession into a boom period. D The yield from taxation continuously increased.

1 marks

Answer: B

This question in 9708/31 May/June 2011

24 The diagram shows a government’s revenue and expenditure for three years. revenue 2008 expenditure revenue 2009 expenditure revenue 2010 expenditure 0 1 2 3 4 $m What can be concluded from the diagram? A A budget deficit was replaced by a budget surplus. B A government borrowing requirement emerged. C The economy moved from a recession into a boom period. D The yield from taxation continuously increased.

1 marks

Answer: B

This question in 9708/32 May/June 2011

24 The diagram shows a government’s revenue and expenditure for three years. revenue 2008 expenditure revenue 2009 expenditure revenue 2010 expenditure 0 1 2 3 4 $m What can be concluded from the diagram? A A budget deficit was replaced by a budget surplus. B A government borrowing requirement emerged. C The economy moved from a recession into a boom period. D The yield from taxation continuously increased.

1 marks

Answer: B

This question in 9708/33 May/June 2011

21 What is likely to increase a country’s actual output in the short run but may reduce its long-run rate of growth of potential output? A an increase in the size of the government’s budget deficit B an increase in the size of the labour force C increased female participation in the labour force D increased government spending on education

1 marks

Answer: A

This question in 9708/31 Oct/Nov 2011

29 The diagram shows the time path of actual output and of long-term potential output of an economy. potential output output actual output O time What would help to reduce the divergence of actual output from potential output? A a balanced budget B a stable exchange rate C automatic stabilisers D stable interest rates

1 marks

Answer: C

This question in 9708/31 Oct/Nov 2011

30 When might the effectiveness of fiscal expansion in increasing the level of output be increased? A when it is accompanied by an increase in the money supply B when it leads to an appreciation of the country’s exchange rate C when it results in a decrease in the price of government bonds D when the price level increases

1 marks

Answer: A

This question in 9708/31 Oct/Nov 2011

25 A government currently has a balanced budget. It is considering the possible variations in tax revenue and government expenditure shown. government options tax revenue expenditure W increase increase X increase reduce Y reduce increase Z reduce reduce Which three options have the potential to move the budget into surplus? A W, X and Y B W, X and Z C W, Y and Z D X, Y and Z

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2011

29 Assuming no change in tax rates or tax-free allowances, for which tax would the amount paid in tax become a smaller proportion of taxpayers’ income during a period of wage and price inflation? A a progressive income tax B a specific tax on tobacco C capital gains tax D value added tax

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2011

29 When might the effectiveness of fiscal expansion in increasing the level of output be increased? A when it is accompanied by an increase in the money supply B when it leads to an appreciation of the country’s exchange rate C when it results in a decrease in the price of government bonds D when the price level increases

1 marks

Answer: A

This question in 9708/33 Oct/Nov 2011

17 Due to a cyclical downturn, a government is experiencing a budget deficit. If the government wishes to stimulate aggregate demand, which policy would be most effective? A financing the deficit by borrowing from the Central Bank B financing the deficit by selling bonds to individuals C financing the deficit by selling state assets to private firms D increasing tax rates to eliminate the deficit

1 marks

Answer: A

This question in 9708/31 May/June 2012

30 The government of Lesotho introduces a programme to promote exports and to encourage firms to grow by subsidising local entrepreneurs. What effect is this likely to have on incomes, the balance of payments current account deficit and government expenditure in Lesotho? balance of government incomes payments current expenditure account deficit A fall uncertain rise B rise reduce no change C fall reduce rise D rise uncertain rise

1 marks

Answer: D

This question in 9708/32 May/June 2012

17 Due to a cyclical downturn, a government is experiencing a budget deficit. If the government wishes to stimulate aggregate demand, which policy would be most effective? A financing the deficit by borrowing from the Central Bank B financing the deficit by selling bonds to individuals C financing the deficit by selling state assets to private firms D increasing tax rates to eliminate the deficit

1 marks

Answer: A

This question in 9708/33 May/June 2012

30 A government responds to cyclical fluctuations in output by keeping tax rates and benefit rates unchanged. What is the government seeking to achieve by adopting this fiscal policy? A to allow automatic stabilisers to work B to keep output at the full employment level C to maintain a constant balanced budget D to ensure that its budget is in surplus over the trade cycle

1 marks

Answer: A

This question in 9708/33 May/June 2012

28 During a recession, a government increases its expenditure on goods and services by $10 million but leaves tax rates unchanged. Why might the subsequent increase in national income be less than $10 million? A Increased government borrowing increases interest rates. B The marginal propensity to consume is less than 1. C The marginal propensity to import is greater than 0. D There is no accelerator effect on investment.

1 marks

Answer: A

This question in 9708/32 Oct/Nov 2012

29 Why is it more effective to increase regressive taxes rather than progressive taxes when pursuing a deflationary fiscal policy? A Changes in VAT have minimal effect on consumers’ spending. B It is much more unfair to increase progressive taxes. C Many workers reduce the hours they work when income taxes are raised. D Low income households spend a larger proportion of their incomes.

1 marks

Answer: D

This question in 9708/32 Oct/Nov 2012

30 In an economy, the marginal propensity to consume of the unemployed is higher than that of taxpayers. The government increases expenditure on unemployment benefits by $10 million. What will the government need to do if it wishes to keep aggregate demand unchanged? A raise taxation by less than $10 million B raise taxation by more than $10 million C raise taxation by $10 million D leave taxes unchanged

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2012

15 Which combination of circumstances is most likely to lead to an increase in a country’s budget deficit? discretionary total GDP unemployment government spending A decreases rises decreases B decreases rises no change C increases falls increases D increases falls no change

1 marks

Answer: B

This question in 9708/31 May/June 2013

30 What does a government need to do to maintain a balanced budget? A keep tax rates and benefit rates unchanged in a slump B raise taxes in a slump and lower taxes in a boom C raise both tax rates and benefit rates in a boom D raise both tax rates and benefit rates in a slump

1 marks

Answer: B

This question in 9708/31 May/June 2013

30 Without any change in government policy, what will be the effect of an economic recession on tax revenue and on government expenditure? government tax revenue expenditure A decrease decrease B decrease increase C increase increase D increase decrease

1 marks

Answer: B

This question in 9708/32 May/June 2013

15 Which combination of circumstances is most likely to lead to an increase in a country’s budget deficit? discretionary total GDP unemployment government spending A decreases rises decreases B decreases rises no change C increases falls increases D increases falls no change

1 marks

Answer: B

This question in 9708/33 May/June 2013

30 What does a government need to do to maintain a balanced budget? A keep tax rates and benefit rates unchanged in a slump B raise taxes in a slump and lower taxes in a boom C raise both tax rates and benefit rates in a boom D raise both tax rates and benefit rates in a slump

1 marks

Answer: B

This question in 9708/33 May/June 2013

26 The diagram shows details of the British Government’s estimated spending and receipts for 2010–2011. All figures in UK £bn. spending receipts health national 122 welfare income tax insurance 226 150 99 total: education total: £697 89 £548 VAT billion billion 81 debt other interest 79 excise duties 44 46 other defence 114 council tax 40 corporation 25 law and business tax housing & 43 order rates environment 35 25 27 What can be concluded from the diagram? effect of largest type of largest overall budget spending item on receipt item balance income distribution A less equitable indirect tax deficit B less equitable indirect tax surplus C more equitable direct tax deficit D more equitable direct tax surplus

1 marks

Answer: C

This question in 9708/31 Oct/Nov 2013

27 What do governments need to do to allow automatic stabilisers to work? A adjust taxes in order to achieve a balanced budget B keep welfare benefit rates and tax rates unchanged C lower both taxes and government expenditure in a slump D lower taxes in a boom and raise taxes in a slump

1 marks

Answer: B

This question in 9708/31 Oct/Nov 2013

27 What is a reflationary fiscal measure? A reducing interest rates B increasing the money supply C increasing taxes D increasing government spending

1 marks

Answer: D

This question in 9708/32 Oct/Nov 2013

30 During year 1, a government announces a temporary one-year reduction in the level of indirect taxation balanced by an equivalent temporary one-year increase in direct taxation. What is most likely to be the impact on household saving in year 1 and in year 2? impact on household impact on household saving in year 1 saving in year 2 A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2013

30 A country’s government wishes to switch demand away from private consumption towards investment and net exports. Which combination of policy measures would be most likely to help it achieve this objective? interest rates rate of income tax A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 9708/33 Oct/Nov 2013

20 In an economy in which there is full employment, the marginal propensity to consume of pensioners is greater than that of taxpayers. Government expenditure on pensions is decreased by $20 billion. To maintain full employment, taxation must be A increased by more than $20 billion. B increased by less than $20 billion. C reduced by less than $20 billion. D reduced by more than $20 billion.

1 marks

Answer: D

This question in 9708/31 Oct/Nov 2014

18 Despite a government budget deficit, a country’s money supply remains unchanged. What could explain this? A The country has a balance of payments surplus equal to the government budget deficit. B The country’s foreign exchange rate is fixed. C The government budget deficit is financed by borrowing from the central bank. D The government budget deficit is financed by selling government bonds to members of the public.

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2014

21 A country’s government has a fiscal deficit of $200 billion which it finances by borrowing from the central bank. In the absence of offsetting factors, what will happen to aggregate expenditure and to the money supply if the government reduces the size of its deficit to $120 billion by cutting public spending? aggregate money supply expenditure A decrease decrease B increase decrease C decrease increase D increase increase

1 marks

Answer: C

This question in 9708/33 Oct/Nov 2014

29 An economy with unemployed resources experiences an increase in government expenditure financed by borrowing from the non-bank private sector. What would diminish the resulting increase in GDP? A an expansion of the money supply B an increase in private investment C a reduction in the marginal propensity to save D a rise in the level of interest rates

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2014

25 The table shows government revenue and expenditure of four countries as a % of GDP in 2000 and 2010. Which country moved from a budget deficit position in 2000 to a budget surplus in 2010? revenue (% of GDP) expenditure (% of GDP) 2000 2010 2000 2010 A France 50.2 49.5 51.7 56.6 B Norway 57.7 56.7 42.3 45.5 C Sweden 58.7 52.4 55.1 52.5 D Switzerland 35.2 34.0 35.6 33.8

1 marks

This question in 9708/31 Oct/Nov 2015

30 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 deficit B to reduce the inequality of income distribution C to reduce the level of unemployment D to reduce the rate of inflation

1 marks

This question in 9708/31 Oct/Nov 2015

24 In the absence of offsetting changes, what will result in an increase in a government’s fiscal deficit? A a decrease in household saving B a decrease in interest rates on government bonds C a decrease in private sector investment D a decrease in the country’s trade deficit

1 marks

Answer: C

This question in 9708/32 Oct/Nov 2015

27 An economy has underemployed resources. Which method of financing an increase in government expenditure is likely to have the greatest expansionary effect? A borrowing from the central bank B borrowing from the non-bank private sector C increased direct taxation D increased indirect taxation

1 marks

Answer: A

This question in 9708/32 Oct/Nov 2015

25 A fall in aggregate demand results in a rise in the number of full-time workers who are unemployed. What is the most likely direct consequence? A a deterioration in the country’s balance of trade B an influx of workers from abroad C a rise in the government’s budget deficit D a rise in the rate of inflation

1 marks

Answer: C

This question in 9708/33 Oct/Nov 2015

28 In an economy operating below full employment, which combination of changes will definitely result in a decrease in national income? A a fall in government expenditure together with a rise in the propensity to import B a fall in the rate of taxation together with a rise in the saving rate C a rise in investment expenditure together with a rise in the rate of taxation D a rise in the propensity to consume together with a rise in the rate of taxation

1 marks

Answer: A

This question in 9708/33 Oct/Nov 2015

29 What could be expected to increase the pressure of demand-pull inflation in an open economy? A an appreciation of the foreign exchange rate B an increase in interest rates C an increase in sales taxes D an increase in the budget deficit

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2015

27 When would an economic recession result in an increase in a government’s budget deficit? A The government increases tariffs on imports with inelastic demand and keeps the total amount it spends on unemployment benefit unchanged. B The government keeps the unemployment benefit rate and direct and indirect tax rates unchanged. C The government reduces foreign aid and widens the tax base. D The government reduces the unemployment benefit rate and decreases the tax free allowance on income tax.

1 marks

Answer: B

This question in 9708/32 May/June 2016

29 The government of Lesotho introduces a programme to promote exports and to encourage firms to expand by subsidising local entrepreneurs. What effect is this likely to have on incomes, the balance of payments current account deficit and government expenditure in Lesotho? balance of government incomes payments current expenditure account deficit A fall reduce rise B fall uncertain rise C rise reduce no change D rise uncertain rise

1 marks

Answer: D

This question in 9708/33 May/June 2016

30 Which policy’s principal aim is to ensure sound public finances? A environmental policy B fiscal policy C monetary policy D supply-side policy

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2016

27 In 2015, the World Bank agreed to give a loan of $650 m to Angola to help stabilise the economy. The Bank said Angola needed to have a fiscal policy that would encourage the diversification of its economy. Which policy would be consistent with this requirement? A the lowering of interest rates to encourage investment in solar power B the relaxing of regulations to allow the development of a new hydro-power project C the spending of the loan supporting its oil industry after oil prices collapsed D the subsidising of a partnership with a French company to establish a chain of tourist hotels

1 marks

Answer: D

This question in 9708/32 May/June 2017

29 In 1979 in the UK the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. By 1989 the highest marginal rate was reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially. Which theoretical concept illustrates this relationship between tax rates and tax revenue? A the J curve B the Laffer curve C the Marshall-Lerner condition D the Phillips curve

1 marks

Answer: B

This question in 9708/33 May/June 2017

27 Which policy is likely to increase unemployment? A an increase in retraining facilities B a significant increase in indirect taxes C the imposition of selective import controls D an increase in the public sector deficit

1 marks

Answer: B

This question in 9708/32 Feb/March 2019

28 A government in a developed economy wishes to reduce cyclical unemployment. Which policy is likely to be most effective? A decrease government expenditure and increase income tax B decrease its budget deficit C increase government expenditure and decrease income tax D increase its budget surplus

1 marks

Answer: C

This question in 9708/32 Feb/March 2019

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

1 marks

Answer: C

This question in 9708/32 May/June 2019

23 What is an example of a Keynesian macroeconomic policy that would reduce cyclical unemployment? A an increase in government spending on new infrastructure such as roads B an increase in government spending on retraining workers C a reduction in the rate of tax on imports D a reduction in the rate of tax on goods and services

1 marks

Answer: A

This question in 9708/32 Feb/March 2020

23 Which policy combination will reduce the level of national income by the greatest amount? A decrease direct taxation and increase interest rates B decrease direct taxation and increase quantitative easing C increase direct taxation and increase interest rates D increase direct taxation and increase quantitative easing

1 marks

Answer: C

This question in 9708/32 Feb/March 2021

30 What is a reflationary fiscal measure? A increasing government spending B increasing taxes C increasing the money supply D reducing interest rates

1 marks

Answer: A

This question in 9708/32 Feb/March 2021

13 A government implements three economic policies. 1 lower income tax 2 higher indirect taxation on alcohol to reduce consumption 3 higher spending on infrastructure Which policies represent forms of government macro economic policy? A 1 and 3 B 2 and 3 C 2 only D 3 only

1 marks

Answer: A

This question in 9708/31 May/June 2021

23 A government is committed to increasing real GDP using only fiscal and monetary policies. Which combination of measures is likely to be the most effective in achieving this aim? fiscal policy monetary policy A increase in the budget deficit central bank buys back government bonds B increased government spending on roads increased short term rate of interest C reduce income taxes central bank sells more government bonds D reduce wealth taxes increase commercial banks’ cash deposit ratio

1 marks

Answer: A

This question in 9708/31 May/June 2021

29 In country X the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. The highest marginal rate was then reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially. Which theoretical concept illustrates this relationship between tax rates and tax revenue? A the J curve B the Laffer curve C the Marshall-Lerner condition D the Phillips curve

1 marks

Answer: B

This question in 9708/31 May/June 2021

30 A government currently has a balanced budget. It is considering the possible variations in tax revenue and government expenditure shown. government option tax revenue expenditure W increase increase X increase reduce Y reduce increase Z reduce reduce Which three options are likely to have the potential to move the budget into surplus? A W, X and Y B W, X and Z C W, Y and Z D X, Y and Z

1 marks

Answer: B

This question in 9708/32 May/June 2021

13 A government implements three economic policies. 1 lower income tax 2 higher indirect taxation on alcohol to reduce consumption 3 higher spending on infrastructure Which policies represent forms of government macro economic policy? A 1 and 3 B 2 and 3 C 2 only D 3 only

1 marks

Answer: A

This question in 9708/33 May/June 2021

23 A government is committed to increasing real GDP using only fiscal and monetary policies. Which combination of measures is likely to be the most effective in achieving this aim? fiscal policy monetary policy A increase in the budget deficit central bank buys back government bonds B increased government spending on roads increased short term rate of interest C reduce income taxes central bank sells more government bonds D reduce wealth taxes increase commercial banks’ cash deposit ratio

1 marks

Answer: A

This question in 9708/33 May/June 2021

29 In country X the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. The highest marginal rate was then reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially. Which theoretical concept illustrates this relationship between tax rates and tax revenue? A the J curve B the Laffer curve C the Marshall-Lerner condition D the Phillips curve

1 marks

Answer: B

This question in 9708/33 May/June 2021

22 Which policy would be most likely to increase employment? A decreasing duties on imports B decreasing unemployment benefits C increasing income tax D increasing interest rates

1 marks

Answer: B

This question in 9708/31 Oct/Nov 2021

29 Which policy is most likely to conflict with a government’s aim of price stability in the short run? A increasing spending on education and health B increasing the basic rate of income tax C limiting wage increases in the public sector D preventing mergers of large companies

1 marks

Answer: A

This question in 9708/32 Oct/Nov 2021

29 The diagram shows the relationship between tax revenue and the tax rate. tax revenue collected 0 25 50 75 100 tax rate on income (%) What is the curve on the diagram called? A income elasticity curve B J curve C Lorenz curve D Laffer curve

1 marks

Answer: D

This question in 9708/31 May/June 2022

29 The diagram shows the relationship between tax revenue and the tax rate. tax revenue collected 0 25 50 75 100 tax rate on income (%) What is the curve on the diagram called? A income elasticity curve B J curve C Lorenz curve D Laffer curve

1 marks

Answer: D

This question in 9708/33 May/June 2022

22 The graph shows the percentage unemployed in a country for the period 2017–2021. 8.5 % 8 7.5 7 6.5 6 5.5 5 4.5 2017 2018 2019 2020 2021 What is the most likely cause of the change in unemployment? A a reduction in government expenditure B a reduction in interest rates C a reduction in investment by firms D a slowdown in growth in the global economy

1 marks

Answer: B

This question in 9708/31 Oct/Nov 2022

27 Under which circumstances will the future burden of the national debt on a country increase the most? increase in the price of change in GDP budget deficit government bonds A +2% of GDP +4% decreasing B +2% of GDP +4% increasing C +4% of GDP +2% decreasing D +4% of GDP +2% increasing

1 marks

Answer: C

This question in 9708/32 Oct/Nov 2022

29 A country with an income tax rate X decides to increase its tax rate. The diagram shows tax revenue will fall. tax revenue O X tax rate Why would this happen? A Fewer goods will be produced. B People will work fewer hours to maintain incomes. C Prices will rise. D There will be an increase in tax avoidance.

1 marks

Answer: D

This question in 9708/32 Oct/Nov 2022

28 What is illustrated by the Laffer curve? A As income increases, fewer hours will be worked. B As income increases, tax revenue will increase. C As the tax rate increases, tax revenue always increases. D As the tax rate increases, tax revenue will eventually fall.

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2022

29 A government decides to increase direct taxation. Which combination would describe the impact of this policy on unemployment, growth and balance of payments? unemployment growth balance of payments A improves improves improves B improves improves worsens C worsens worsens improves D worsens worsens worsens

1 marks

Answer: C

This question in 9708/33 Oct/Nov 2022

30 How will inflation and unemployment most likely be affected by a rise in the rate of income tax if government expenditure does not change? inflation unemployment A falls rises B falls falls C rises rises D rises falls

1 marks

Answer: A

This question in 9708/33 Oct/Nov 2022

17 Which combination of circumstances is most likely to lead to an increase in a country’s budget deficit? government total GDP unemployment spending A decreases rises decreases B decreases rises no change C increases falls increases D increases falls no change

1 marks

Answer: B

This question in 9708/32 Feb/March 2023

20 Which policy is likely to increase unemployment? A an increase in retraining facilities B a significant increase in indirect taxes C the imposition of selective import controls D an increase in the public sector deficit

1 marks

Answer: B

This question in 9708/32 Feb/March 2023

23 A government adopts an expansionary fiscal policy to increase the economic growth rate. Which other main macroeconomic aims is this policy most likely to help? full stable current account employment price level surplus 0 OD > \ -« x «x KM «x \OK

1 marks

Answer: D

This question in 9708/32 Feb/March 2023

25 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 deficit B to reduce the inequality of income distribution C to reduce the level of unemployment D to reduce the rate of inflation

1 marks

Answer: A

This question in 9708/32 May/June 2023

24 The Laffer curve shows expected tax revenues at different tax rates. R1 tax R2 revenue 0 50 60 tax rate / % An increase in the tax rate above 50% is expected to decrease tax revenue. What is the reason for this? A decreased incentive for emigration B decreased incentive for tax evasion C increased incentive for people to work D increased incentive for people to work fewer hours

1 marks

Answer: D

This question in 9708/31 Oct/Nov 2023