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Topical›Economics 0455›Government and the macroeconomy›Fiscal policy›Paper 1

Fiscal policy — Paper 1 · IGCSE Economics 0455

4.3· 237 questions · 237 marks · 284 min · 2004–2025· Multiple choice

Every Cambridge IGCSE Economics Paper 1 question on fiscal policy, laid out as 56 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

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Questions56 pages

Question 1: What is most likely to happen as unemployment falls? A Economic growth falls. B Inflation falls. C Spending on welfare benefits rises. D Ta…Question 2: In September 2002 a government minister warned that tax changes were necessary to redistribute wealth from rich to poor. Which policy would…Question 3: Which aim of government policy is most likely to be achieved by a decrease in government spending? A economic growth B equality of income C…Question 4: The graph shows government revenue and spending in a country between 1994 and 2001. 48 46 government spending 44 42 % of 40 GDP 38 36 gover…1 / 56
Question 5: The diagram shows the demand and supply curves for digital cameras. The original equilibrium point is X. What will be the new equilibrium p…Question 6: What might a government decrease if it wished to slow down the rate of growth in an economy? A expenditure on defence B goods and services …Question 7: What is most likely to cause the government to have a budget surplus? A a decrease in government spending B a decrease in private sector in…Question 8: When is a tax progressive? A when some goods have a higher tax than others B when the tax is on incomes rather than on goods or services C …Question 9: When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all …2 / 56
Question 10: The governments of many countries raise revenue from a tax on a wide range of essential goods and services. What is the nature of this tax?…Question 11: A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise…Question 12: Which of the following is not included in public expenditure? A capital spending by companies B interest payments on government borrowing C…Question 13: A government is faced with the choice of raising taxation or cutting public spending. Of what is this an example? A conservation of resourc…Question 14: The information below refers to an economy for a financial year. Government expenditure = $2 866 million Government revenue = $1 940 millio…3 / 56
Question 15: A local tax will usually be A raised by a central government. B used to provide a national road network. C different from region to region.…Question 16: The table shows earnings and total income tax paid per annum. earnings $ total income tax paid $ 5000 1000 8000 2000 9000 3000 Which type o…Question 17: What could a government in a developed economy do to increase demand? A create a budget surplus B increase taxes C reduce government spendi…Question 18: To pay for local projects the government imposes a charge of $500 on each adult with a 100 % increase for those on higher incomes. Which di…Question 19: What might a government increase if it wished to raise the growth rate of an economy? A expenditure on road building B goods and services t…4 / 56
Question 20: What is meant by a regressive indirect tax? A a tax on income that falls more heavily on the poor B a tax on income that falls more heavily…Question 21: A government decreased the tax on all goods produced in a country. What is the most likely result of this? A a decrease in imports B a decr…Question 22: What describes a regressive income tax? A As income rises the proportion of tax paid remains constant. B As income rises the tax rate on ad…Question 23: A high proportion of people in a developing country have very low incomes. Which government policy would help reduce this level of poverty?…Question 24: When is there a budget surplus? A when government expenditure is greater than government revenue B when government revenue is greater than …Question 25: A country has different rates of income tax depending on the level of income earned. The highest rate of income tax is cut from 40 % to 38 …5 / 56
Question 26: What is a direct tax? A a tax on electricity B a tax on imported goods C a tax on services D a tax on income and wealthQuestion 27: What is a direct tax? A a tax on electricity B a tax on imported goods C a tax on services D a tax on income and wealthQuestion 28: The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the price to the consumer rises from $4 to $5. S2 …Question 29: Direct taxes can be used to A place the burden of tax on sellers not buyers. B protect domestic industries from foreign competition. C rais…Question 30: Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the government were to cut tax rates, the government wou…6 / 56
Question 31: Direct taxes can be used to A place the burden of tax on sellers not buyers. B protect domestic industries from foreign competition. C rais…Question 32: Direct taxes can be used to A place the burden of tax on sellers not buyers. B protect domestic industries from foreign competition. C rais…Question 33: Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the government were to cut tax rates, the government wou…Question 34: In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in petrol tax will be mainly on A the comp…Question 35: When is a direct tax described as progressive? A when the government changes the basic rate of tax in each budget B when the government tax…Question 36: During 2009 some governments adopted policies to try to end the recession in their country and increase economic growth. Which combination …7 / 56
Question 37: When is a direct tax described as progressive? A when the government changes the basic rate of tax in each budget B when the government tax…Question 38: During 2009 some governments adopted policies to try to end the recession in their country and increase economic growth. Which combination …Question 39: When is a direct tax described as progressive? A when the government changes the basic rate of tax in each budget B when the government tax…Question 40: During 2009 some governments adopted policies to try to end the recession in their country and increase economic growth. Which combination …Question 41: Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT). How wou…8 / 56
Question 42: In 2009, the Chinese Government tried to increase household spending. Which policy measure would have been most likely to achieve this obje…Question 43: Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT). How wou…Question 44: In 2009, the Chinese Government tried to increase household spending. Which policy measure would have been most likely to achieve this obje…Question 45: A tax on which of the following is usually progressive and is paid by a large number of tax payers? A company profits B goods and services …Question 46: Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT). How wou…9 / 56
Question 47: In 2009, the Chinese Government tried to increase household spending. Which policy measure would have been most likely to achieve this obje…Question 48: A tax on which of the following is usually progressive and is paid by a large number of tax payers? A company profits B goods and services …Question 49: A country has a tax system which places no tax on incomes below $5000, is proportional on incomes between $5000 and $10 000 and is progress…10 / 56
Question 50: A country has a tax system which places no tax on incomes below $5000, is proportional on incomes between $5000 and $10 000 and is progress…Question 51: What would be most likely to reduce the rate of inflation? A an increase in direct taxes B an increase in government expenditure C an incre…Question 52: A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income t…Question 53: A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise…11 / 56
Question 54: The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 4…Question 55: A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income t…Question 56: A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise…12 / 56
Question 57: The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 4…Question 58: A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise…13 / 56
Question 59: The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 4…Question 60: In an economic recession, which policy might be adopted to reduce unemployment? A an increase in foreign exchange rates B an increase in in…Question 61: In the first six months of 2011 a construction company, Morgan Sindall, saw its profits fall. Part of the reason was the increased competit…Question 62: Which combination of government policies is most likely to be successful at reducing unemployment? A budgeting for a surplus and lowering i…14 / 56
Question 63: A government wishes to raise the general standard of living in its country. In the short run, which policy would be the most likely to achi…Question 64: Which combination of government policies is most likely to be successful at reducing unemployment? A budgeting for a surplus and lowering i…Question 65: A government wishes to raise the general standard of living in its country. In the short run, which policy would be the most likely to achi…Question 66: A government wishes to raise the general standard of living in its country. In the short run, which policy would be the most likely to achi…Question 67: A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise dut…15 / 56
Question 68: Which pair of government actions combines a fiscal policy with a supply-side policy? A changing government spending with changing interest …Question 69: A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise dut…Question 70: A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise dut…Question 71: The following is a headline from the newspaper. Car drivers to pay higher taxes What will result from an increased tax on cars? A increased…16 / 56
Question 72: In 2011 the Egyptian Government increased the top rate of income tax. What is likely to have been the main aim of this policy measure? A a …Question 73: What describes a regressive tax? A It is paid by a higher proportion of high income earners. B It is paid by a higher proportion of low inc…Question 74: The table shows the tax paid at different levels of income. income amount of tax ($) ($) 6000 600 7000 700 8000 900 9000 1100 Which describ…Question 75: What describes a regressive tax? A It is paid by a higher proportion of high income earners. B It is paid by a higher proportion of low inc…Question 76: In 2011 the Egyptian Government increased the top rate of income tax. What is likely to have been the main aim of this policy measure? A a …17 / 56
Question 77: The table shows the tax paid at different levels of income. income amount of tax ($) ($) 6000 600 7000 700 8000 900 9000 1100 Which describ…Question 78: What describes a regressive tax? A It is paid by a higher proportion of high income earners. B It is paid by a higher proportion of low inc…Question 79: The table shows the tax paid at different levels of income. income amount of tax ($) ($) 6000 600 7000 700 8000 900 9000 1100 Which describ…18 / 56
Question 80: The government reduces the rate of income tax and increases the rate of tax on producers. From the initial equilibrium point X, which lette…Question 81: Which policy combination will have the greatest impact on increasing the level of total spending in the economy? government taxation spendi…Question 82: A toy company bought a $750 000 batch of raw plastic from a local firm and moulded it into toys. The total revenue from the toys was $1 000…19 / 56
Question 83: The diagram shows the percentage of income taken by a tax at different levels of income. % paid in tax tax O income What term is used to de…Question 84: The diagram shows the imposition of a tax of UZ on a good. St S T U price W V E Y Z D O Qt Q quantity Which area shows the government’s tax…Question 85: A government decided to increase its spending on building schools and hospitals. Which aim of government policy is most likely to be achiev…Question 86: What is likely to fall when the rate of unemployment in a country falls? A business confidence B consumer spending C government budget defi…20 / 56
Question 87: How do high direct taxes affect spending and how do high interest rates affect saving by wage- earners? spending saving A decrease decrease…Question 88: A government wishes to close the gap between the earnings of the rich and the poor. What should it do to achieve this aim? A increase progr…Question 89: A government decided to increase its spending on building schools and hospitals. Which aim of government policy is most likely to be achiev…Question 90: In 2014, a plan for a major new rail link funded by central and regional government was announced. It would involve the redevelopment of a …21 / 56
Question 91: The table shows information for two workers. doctor window cleaner annual income ($) 60 000 24 000 total deductions ($) 10 000 8 000 Both w…Question 92: Other things being equal, what is likely to decrease public spending? A an increase in the age of retirement B an increase in the birth rat…Question 93: When is a tax regressive? A when some goods have a lower tax than others B when the tax as a proportion of income decreases as income incre…Question 94: The Government of India wishes to help the very poorest people. Which policy would be most likely to achieve this? A lowering capital gains…Question 95: A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income t…22 / 56
Question 96: A government decides to make two changes to its taxation policies. It lowers the tax on petrol and raises the tax on food. How do these cha…Question 97: The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 insur…Question 98: A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income t…Question 99: A government fixes the rate of income tax at $0.20 per dollar earned. What describes this type of taxation? A indirect B progressive C prop…23 / 56
Question 100: The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 inher…Question 101: A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income t…Question 102: The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 inher…Question 103: Which policy combination will be the most effective if a government wishes to increase the level of employment? A decrease general taxation…24 / 56
Question 104: The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries. From this information, which country had the high…Question 105: A government introduces state benefits for the unemployed and increases the top rate of income tax to pay for the benefits. What effect wil…Question 106: A government decides to increase the rate of income tax and spend the extra revenue on providing training colleges. How might this be descr…Question 107: The table shows taxes as percentages of Gross Domestic Product (GDP) for four countries. From this information, which country had the lowes…25 / 56
Question 108: The Indian government uses direct and indirect taxation. Which is a direct tax? A corporate (profits) tax B customs duty C goods and servic…Question 109: A worker earns $60 000 a year and pays 25% income tax. He spent $2000 on furniture and $5000 on a computer and paid 20% sales tax on each. …Question 110: When is a tax progressive? A when some goods have a higher tax than others B when the rate of tax increases as income increases C when the …Question 111: A government intends to improve skills by offering free training to school leavers at age 16 until they reach 18 years. It proposes to pay …26 / 56
Question 112: The charts relate to the Financial Statement of the government of New Zealand for 2014. sales of goods state and services other enterprises…Question 113: The information below refers to an economy for a financial year. government expenditure = $2866 million government revenue = $1940 million …Question 114: The government increases the rate of income tax and decreases the rate of a sales tax (VAT). From the initial equilibrium point of X, which…27 / 56
Question 115: A government wishes to try to make the distribution of income in the country more equal. Which policy would be most likely to achieve this?…Question 116: Which policy combination will be the most effective if a government wishes to increase the level of employment? A decrease general taxation…Question 117: The information below refers to an economy for a financial year. government expenditure = $2866 million government revenue = $1940 million …Question 118: When is a tax progressive? A when some goods have a higher tax than others B when the rate of tax increases as income increases C when the …Question 119: Why can government spending be described both as a fiscal policy and a supply-side policy? A It has a nationwide effect and can control fir…28 / 56
Question 120: A government cuts the rate of income tax. What effect is this likely to have on tax evasion and revenue from indirect taxes? revenue from t…Question 121: The information below refers to an economy for a financial year. government expenditure = $2866 million government revenue = $1940 million …Question 122: The graph shows the percentage of income paid in taxation. Which line represents a proportional tax? A % income B paid in taxation C D O in…Question 123: An economy is predicted to grow at a rate of 3% during the next year. What is most likely to cause this growth? A an increase in expenditur…29 / 56
Question 124: What, when increased, will help a government to reduce the rate of inflation? A budget deficit B consumer spending C income tax D pensionsQuestion 125: A worker earns $40 000 a year and pays 20% income tax. He spends $5000 on electrical goods and $10 000 on a car, and pays 20% sales tax on …Question 126: What, when increased, will help a government to reduce the rate of inflation? A budget deficit B consumer spending C income tax D pensionsQuestion 127: Which policy is most likely to increase the level of economic activity? A increasing the exchange rate B increasing the rate of interest C …Question 128: The graph shows the percentage of income paid in taxation. Which line represents a proportional tax? A % income B paid in taxation C D O in…30 / 56
Question 129: A government collects the following revenue in a year. $m customs duties 100 taxes on goods 200 taxes on income 400 taxes on services 300 W…Question 130: The table shows the amount of tax to be paid at different weekly incomes. weekly income ($) 100 150 200 250 weekly tax ($) 20 30 36 40 Whic…Question 131: A government has the following revenue. revenue ($ m) corporation profits tax 20 inheritance tax 30 duty on imports 40 income tax 50 sales …Question 132: A government seeks to redistribute income from the rich to the poor. Which combination of policy measures is most likely to achieve this ai…31 / 56
Question 133: What is a disadvantage of direct taxes? A They can be a disincentive to work. B They can be based on people’s ability to pay. C They can be…Question 134: When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all …Question 135: When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all …Question 136: The table shows the amount of tax paid as income rises in four countries, A–D. Which country has a progressive tax? amount of tax (US$) pai…Question 137: What is most likely to be an example of a progressive tax? A customs duties on imported goods B excise duties on cigarettes C income tax D …Question 138: When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all …32 / 56
Question 139: A government aims to boost production and increase sales of steel by subsidising private producers. A subsidy equal to W – Z per tonne is p…Question 140: What is an example of an expansionary fiscal policy? A decreased budget deficit B higher interest rates C increased money supply D reduced …Question 141: Which policy would be most likely to reduce unemployment in the short run? A a programme of privatisation B a reduction in the standard rat…Question 142: A government increases the rate of income tax in order to pay for extra transfer payments, including cash benefits to the poor. What must o…33 / 56
Question 143: The standard rate for Value Added Tax (sales tax) is 20% in a country. Different consumers buying the same product have to pay the same amo…Question 144: The diagram shows the demand curve D1 and supply curve S1 for a good. The government introduces a subsidy to encourage production. price S1…Question 145: A country is experiencing a period of full employment. What is most likely to lead to an increase in demand-pull inflation? A an increase i…Question 146: Which policy is most likely to reduce relative poverty? A make income tax rates less progressive B reduce benefit payments C reduce the min…34 / 56
Question 147: The government increases taxation in order to fund an increase in spending on government training schemes. Which policy combination would t…Question 148: Which form of taxation always takes an increasing percentage of the taxpayer’s income as it rises? A indirect B progressive C proportionate…Question 149: One aim of government policy is to redistribute income through taxation in order to reduce inequality. Which policy will achieve this aim? …Question 150: Which actions would be likely to increase government expenditure and reduce revenues from taxation? government expenditure tax revenues A i…35 / 56
Question 151: The diagram shows the impact of a government imposing an indirect tax on a good. The original demand curve is D1 and original supply curve …Question 152: Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive when comparing high-income and low-income purchas…Question 153: Which combination of policy measures would be effective in reducing the effects of a recession? A a reduction in interest rates and a reduc…Question 154: How would government spending on education be classified? fiscal monetary supply-side policy policy policy A no no yes B no yes no C yes no…36 / 56
Question 155: A government decides to increase tax revenues from consumer expenditure. Which tax will it increase? A capital gains tax B death duties C p…Question 156: A government uses a mixture of fiscal policy measures and supply-side policy measures to stimulate growth in the economy. Which combination…Question 157: The table shows tax paid at different income levels in an economy. income level tax paid ($) ($) 5 000 500 12 000 2400 20 000 5000 30 000 6…Question 158: What is most likely to cause a more even distribution of income? A an increase in indirect taxation B an increase in inflation C an increas…37 / 56
Question 159: In the past, governments have adopted policies to try to end a recession in their country and increase economic growth. Which combination o…Question 160: When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when gove…Question 161: The government wishes to increase economic growth in its economy. What would not be likely to achieve this aim? A The central bank encourag…Question 162: What is not included in public expenditure? A capital spending by firms B interest payments on government borrowing C investment in defence…Question 163: When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when gove…Question 164: A government increased revenue by increasing taxes on firms. Which tax did it increase? A inheritance tax B profits tax C sales tax D value…38 / 56
Question 165: What is not included in public expenditure? A capital spending by firms B interest payments on government borrowing C investment in defence…Question 166: When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when gove…Question 167: A government has a contractionary fiscal policy to reduce inflation. What will the government increase? A expenditure on infrastructure B i…Question 168: Which measure would indicate that an expansionary fiscal policy is being used by the government? A cuts in government spending B higher int…Question 169: Some governments in the European Union are trying to reduce unemployment. What should increase to achieve this? A imports of goods B intere…Question 170: An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving fo…39 / 56
Question 171: The table shows the tax that an individual would pay at different levels of disposable income. disposable 10 000 20 000 30 000 40 000 incom…Question 172: The government wants to reduce the consumption of cigarettes. Which policy would be most likely to do this? A increasing a subsidy on cigar…Question 173: The table shows the rates of unemployment and real GDP growth for an economy in 2014 and 2018. 2014 2018 rate of 3 10 unemployment (%) rate…Question 174: An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving fo…40 / 56
Question 175: A government decreased the tax on all goods produced in its country. What is the most likely consequence of this? A a decrease in exports B…Question 176: A government reduces social security spending by $10 bn in order to increase defence spending by $10 bn. What is this an example of? A expa…Question 177: What is included in a government’s budget? A the balance of government revenue and government expenditure B the balance of export revenue a…Question 178: Tax is charged at 1.45% on all wages earned to pay for basic medical provision. How would this tax be described? A direct and proportional …Question 179: An economy has a high rate of inflation. In response to this, its government increases income tax. What is the most likely reason for this …41 / 56
Question 180: A government’s revenue grew 8% to $3.25 trillion. Its expenditure was reduced to $3.69 trillion. What can be concluded from this? governmen…Question 181: What is a fiscal policy measure? A direct tax B exchange rates C interest rates D regulationQuestion 182: A country is experiencing unemployment. It has a progressive income tax policy and benefits for the poor. The government aims to increase e…Question 183: What is fiscal policy? A government decisions on money supply and interest rates taken to influence total demand B government decisions on …42 / 56
Question 184: The table shows sources of government revenue for an economy. sources of revenue $ billions sale of government assets 100 sales tax 300 tar…Question 185: Which government policies will both reduce the difference in income between low-paid and high- paid workers? A a decrease in the maximum wa…Question 186: An economy is operating with all resources fully employed. Which would be an outcome of a significant increase in government expenditure? A…Question 187: The table shows a government’s receipts from taxation. $m air passenger duty 10 tax on firms’ profits 100 import duty 75 income tax 200 inh…43 / 56
Question 188: Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate …Question 189: What is a cause of demand-pull inflation? A a surplus of skilled labour B higher government expenditure C higher tax rates D lower net expo…Question 190: The table shows a government’s receipts from taxation. $m air passenger duty 10 tax on firms’ profits 100 import duty 75 income tax 200 inh…Question 191: Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate …44 / 56
Question 192: The table shows a government’s receipts from taxation. $m air passenger duty 10 tax on firms’ profits 100 import duty 75 income tax 200 inh…Question 193: Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate …Question 194: What is an example of a fiscal policy measure? A increasing the exchange rate B reducing the power of trade unions C reducing the rate of c…45 / 56
Question 195: The chart shows a government’s spending in a year. 40 000 $ (millions) 35 000 34 006 30 000 25 000 20 000 18 660 15 280 15 000 10 000 5050 …Question 196: A government wants to reduce both its budget deficit and the amount of poverty in its country. Which fiscal policy measure is most likely t…Question 197: A government decides to increase the indirect tax on petrol. Petrol has an inelastic price elasticity of demand. What are likely to be the …Question 198: What is included in a government budget calculation? A export revenue B external costs C indirect tax revenue D opportunity cost46 / 56
Question 199: Which pair is included in a government’s budget? A consumption and factor income B exports and imports C investments and savings D public e…Question 200: The table shows the rate of income tax paid at different income levels. level of income rate of income tax $ % 30 000 20 40 000 30 50 000 4…Question 201: A government decides to boost the economy through the use of a budget deficit. Which target should it adopt to achieve this aim? A Direct t…Question 202: A government decides to use a fiscal policy measure. What is an example of this? A increasing the exchange rate B reducing the power of tra…Question 203: What is the most likely consequence of increased unemployment? A higher output B higher government budget deficit C higher self-esteem D hi…47 / 56
Question 204: Which combination of government actions is most likely to raise the living standards of lower income groups in an economy? spending on pers…Question 205: In the past, governments have adopted policies to try to end a recession in their country and increase economic growth. Which combination o…Question 206: The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries. From this information, which country had the high…Question 207: A government has introduced a tax on a necessity. Producers have passed on a large proportion of this tax to consumers in the form of highe…48 / 56
Question 208: A government decides to leave direct taxes unchanged but to increase indirect taxes. What is this policy intended to achieve? A to increase…Question 209: A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income t…Question 210: The government of country Z announces a forecast budget deficit of $234 billion, as part of its fiscal policy. What is the effect of this f…Question 211: Which change to fiscal policy is most likely to reduce cyclical unemployment in an economy? A increasing direct taxation B increasing the b…Question 212: A government increases its revenue by higher direct taxation of both personal incomes and company profits. What is most likely to be the re…49 / 56
Question 213: Income tax in a country gives all individuals an initial tax-free income allowance. Any income above this allowance is taxed at increasing …Question 214: An economy is experiencing a period of deflation with lower output and rising unemployment. Which policy measure would the government be mo…Question 215: A government wishes to prevent deflation. Which combination of policies would be the most effective in achieving this aim? government inter…Question 216: What is the most likely impact of lower direct taxes on demand and on supply? demand supply A decrease decrease B decrease increase C incre…50 / 56
Question 217: A government intends to subsidise bus fares and increase taxes on private motoring. How would this affect the private cost of transport? fo…Question 218: The table shows a forecast for a government budget for year 1 and for year 2. year 1 $bn year 2 $bn revenue 50 55 spending 60 60 What does …Question 219: The table shows the rates of unemployment and real GDP growth for an economy in year 1 and year 2. year 1 year 2 rate of 3 7 unemployment (…51 / 56
Question 220: Which macroeconomic policy is most likely to achieve economic growth and price stability at the same time? A fiscal policy B import barrier…Question 221: The table shows government expenditure and revenue in selected years. government tax year expenditure revenue $bn $bn 1 500 500 2 600 400 3…Question 222: The table shows changes in economic policies for four countries, A, B, C and D. Which country is most likely to be following a policy of pr…52 / 56
Question 223: The table shows earnings and total income tax paid per year. earnings $ total income tax paid $ 5000 1000 8000 2000 9000 3000 Which type of…Question 224: A government increases the rate of progressive income tax and its spending on hospitals. What is likely to happen to the distribution of in…Question 225: What is the definition of a government budget? A a forecast of government spending and revenue for the following financial year B an accoun…Question 226: A government decides to increase defence expenditure and reduce direct taxes. Which type of policy is this? A exchange rate policy B fiscal…53 / 56
Question 227: What is a principle of taxation? A equality between social cost and social benefit B fairness between taxpayers C profit maximisation by fi…Question 228: The diagram shows the percentage of income taken by a tax at different levels of income. % paid in tax tax O income Which term is used to d…Question 229: What is not a likely consequence of a rise in the budget deficit in a year? A a rise in government borrowing B a rise in the level of expor…Question 230: A country's unemployment rate increased from 3.6% to 4.2% in one year. What might be the consequences for tax revenues and welfare payments…54 / 56
Question 231: In a country, some highly-paid workers reduce their working hours because of very high income tax rates at higher levels of income. What is…Question 232: A government's spending currently equals its revenue. The government decides to decrease its spending. What is the most likely effect of th…Question 233: A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise dut…Question 234: Which policy measures would be classified as fiscal policy? A changes in interest rates and money supply B changes in labour market policie…55 / 56
Question 235: In many high-income economies, increasing income inequality has led to greater levels of poverty. Which combination of policies would aim t…Question 236: What is not likely to be included in a government budget? A anticipated tax revenue B changes in exchange rates C forecast government borro…Question 237: Which combination of policy measures is most likely to increase total demand in an economy? money supply interest rate exchange rate A decr…56 / 56

Mark scheme237 answers

Answers below. Sit the paper first if you are practising.

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Economics 0455 · Fiscal policy — Paper 1

IGCSE · topical answer key — answer key (teacher use)

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Answer

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1D1
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46A1
47D1
48C1
49A1
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Pastlit

Economics 0455 · Fiscal policy — Paper 1

IGCSE · topical answer key — answer key (teacher use)

Question

Answer

Marks

50A1
51A1
52B1
53C1
54D1
55B1
56C1
57D1
58C1
59D1
60D1
61B1
62D1
63C1
64D1
65C1
66C1
67C1
68B1
69C1
70C1
71C1
72B1
73D1
74C1
75D1
76B1
77C1
78D1
79C1
80B1
81B1
82B1
83D1
84D1
85C1
86C1
87B1
88A1
89C1
90C1
91B1
92A1
93B1
94C1
95B1
96B1
97D1
98B1
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Pastlit

Economics 0455 · Fiscal policy — Paper 1

IGCSE · topical answer key — answer key (teacher use)

Question

Answer

Marks

99C1
100C1
101B1
102D1
103B1
104—1
105—1
106B1
107A1
108A1
109B1
110B1
111C1
112C1
113A1
114D1
115B1
116A1
117A1
118B1
119B1
120A1
121A1
122D1
123A1
124C1
125A1
126C1
127D1
128D1
129D1
130C1
131C1
132C1
133A1
134C1
135C1
136B1
137C1
138C1
139B1
140D1
141B1
142A1
143D1
144B1
145A1
146D1
147B1
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Pastlit

Economics 0455 · Fiscal policy — Paper 1

IGCSE · topical answer key — answer key (teacher use)

Question

Answer

Marks

148B1
149B1
150A1
151A1
152B1
153A1
154C1
155D1
156A1
157B1
158—1
159—1
160C1
161C1
162A1
163C1
164B1
165A1
166C1
167B1
168D1
169C1
170A1
171C1
172D1
173D1
174A1
175C1
176D1
177A1
178A1
179D1
180B1
181A1
182C1
183B1
184B1
185C1
186B1
187C1
188A1
189B1
190C1
191A1
192C1
193A1
194C1
195C1
196C1
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Pastlit

Economics 0455 · Fiscal policy — Paper 1

IGCSE · topical answer key — answer key (teacher use)

Question

Answer

Marks

197B1
198C1
199D1
200B1
201D1
202C1
203B1
204D1
205B1
206C1
207D1
208C1
209B1
210C1
211B1
212C1
213B1
214C1
215C1
216C1
217C1
218A1
219D1
220D1
221C1
222C1
223B1
224D1
225A1
226B1
227B1
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230B1
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232B1
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234C1
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Another paper, or another topic

Paper
Paper 1237 questionsPaper 274 questionsPaper 3questions comingPaper 4questions coming

All of Government and the macroeconomy →

Questions as text

Q1 · What is most likely to happen as unemployment falls? 0455/11 Oct/Nov 2004

25 What is most likely to happen as unemployment falls? A Economic growth falls. B Inflation falls. C Spending on welfare benefits rises. D Tax revenue rises.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2004

Q2 · In September 2002 a government minister warned that tax changes were necessary to… 0455/11 Oct/Nov 2004

27 In September 2002 a government minister warned that tax changes were necessary to redistribute wealth from rich to poor. Which policy would be likely to achieve that aim? regressive taxes progressive taxes A decrease increase B increase decrease C increase unchanged D unchanged decrease

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2004

Q3 · Which aim of government policy is most likely to be achieved by a decrease in government… 0455/11 Oct/Nov 2004

29 Which aim of government policy is most likely to be achieved by a decrease in government spending? A economic growth B equality of income C full employment D price stability

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2004

Q4 · The graph shows government revenue and spending in a country between 1994 and 2001 0455/11 Oct/Nov 2004

30 The graph shows government revenue and spending in a country between 1994 and 2001. 48 46 government spending 44 42 % of 40 GDP 38 36 government revenue 34 32 1994 1995 1996 1997 1998 1999 2000 2001 year What can be concluded from the graph? A The balance of payments position improved. B The borrowing of the government increased. C The economy went into recession. D The government budget moved from deficit to surplus.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2004

Q5 · The diagram shows the demand and supply curves for digital cameras 0455/11 May/June 2006

12 The diagram shows the demand and supply curves for digital cameras. The original equilibrium point is X. What will be the new equilibrium point if these cameras become more fashionable and the rate of sales tax rises? supply B A X C price D demand O quantity

1 marks

Answer: B

This question in 0455/11 May/June 2006

Q6 · What might a government decrease if it wished to slow down the rate of growth in an… 0455/11 May/June 2006

23 What might a government decrease if it wished to slow down the rate of growth in an economy? A expenditure on defence B goods and services (value added) tax C interest rates D the rate of income tax

1 marks

Answer: A

This question in 0455/11 May/June 2006

Q7 · What is most likely to cause the government to have a budget surplus? 0455/11 May/June 2006

24 What is most likely to cause the government to have a budget surplus? A a decrease in government spending B a decrease in private sector investment C an increase in unemployment D an increase in the wages of public sector employees

1 marks

Answer: A

This question in 0455/11 May/June 2006

Q8 · When is a tax progressive? 0455/11 May/June 2006

27 When is a tax progressive? A when some goods have a higher tax than others B when the tax is on incomes rather than on goods or services C when the rate of tax increases as income increases D when the tax is linked to the rate of inflation

1 marks

Answer: C

This question in 0455/11 May/June 2006

Q9 · When is a government said to balance its budget? 0455/11 Oct/Nov 2006

23 When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all regions of the economy C when total exports equal total imports D when its total income equals its total expenditure

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2006

Q10 · The governments of many countries raise revenue from a tax on a wide range of essential… 0455/11 Oct/Nov 2006

25 The governments of many countries raise revenue from a tax on a wide range of essential goods and services. What is the nature of this tax? A It is direct and proportional. B It is direct and regressive. C It is indirect and proportional. D It is indirect and regressive.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2006

Q11 · A country has a proportional system of taxation 0455/11 Oct/Nov 2006

26 A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise to $12 000? A $120 B $500 C $1200 D $7500

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2006

Q12 · Which of the following is not included in public expenditure? 0455/11 Oct/Nov 2006

27 Which of the following is not included in public expenditure? A capital spending by companies B interest payments on government borrowing C investment in defence by the central government D subsidies to bus companies from local government

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2006

Q13 · A government is faced with the choice of raising taxation or cutting public spending 0455/11 May/June 2007

4 A government is faced with the choice of raising taxation or cutting public spending. Of what is this an example? A conservation of resources B monetary policy C opportunity cost D substitution of factors

1 marks

Answer: C

This question in 0455/11 May/June 2007

Q14 · The information below refers to an economy for a financial year 0455/11 May/June 2007

23 The information below refers to an economy for a financial year. Government expenditure = $2 866 million Government revenue = $1 940 million What was the budget balance of the Government in that year? A $926 million in deficit B $4 806 million in deficit C $926 million in surplus D $4 806 million in surplus

1 marks

Answer: A

This question in 0455/11 May/June 2007

Q15 · A local tax will usually be A raised by a central government 0455/11 May/June 2007

24 A local tax will usually be A raised by a central government. B used to provide a national road network. C different from region to region. D raised by using import tariffs.

1 marks

Answer: C

This question in 0455/11 May/June 2007

Q16 · The table shows earnings and total income tax paid per annum 0455/11 Oct/Nov 2007

23 The table shows earnings and total income tax paid per annum. earnings $ total income tax paid $ 5000 1000 8000 2000 9000 3000 Which type of tax system does this illustrate? A indirect B progressive C proportional D regressive

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2007

Q17 · What could a government in a developed economy do to increase demand? 0455/11 Oct/Nov 2007

25 What could a government in a developed economy do to increase demand? A create a budget surplus B increase taxes C reduce government spending D reduce interest rates

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2007

Q18 · To pay for local projects the government imposes a charge of $500 on each adult with a… 0455/11 May/June 2008

26 To pay for local projects the government imposes a charge of $500 on each adult with a 100 % increase for those on higher incomes. Which diagram illustrates this? A B C D tax tax tax tax tax tax tax tax $ $ $ $ 0 income 0 income 0 income 0 income $ $ $ $

1 marks

Answer: C

This question in 0455/11 May/June 2008

Q19 · What might a government increase if it wished to raise the growth rate of an economy? 0455/11 May/June 2008

27 What might a government increase if it wished to raise the growth rate of an economy? A expenditure on road building B goods and services tax (value added tax) C the rate of income tax D the rate of interest

1 marks

Answer: A

This question in 0455/11 May/June 2008

Q20 · What is meant by a regressive indirect tax? 0455/11 May/June 2008

28 What is meant by a regressive indirect tax? A a tax on income that falls more heavily on the poor B a tax on income that falls more heavily on the rich C a tax on spending that falls more heavily on the poor D a tax on spending that falls more heavily on the rich

1 marks

Answer: C

This question in 0455/11 May/June 2008

Q21 · A government decreased the tax on all goods produced in a country 0455/11 May/June 2008

30 A government decreased the tax on all goods produced in a country. What is the most likely result of this? A a decrease in imports B a decrease in industrial production C a decrease in real incomes D a deterioration in the balance of trade in goods

1 marks

Answer: A

This question in 0455/11 May/June 2008

Q22 · What describes a regressive income tax? 0455/11 Oct/Nov 2008

27 What describes a regressive income tax? A As income rises the proportion of tax paid remains constant. B As income rises the tax rate on additional income falls. C As income rises the tax rate on additional income rises. D As income rises the total tax paid rises.

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2008

Q23 · A high proportion of people in a developing country have very low incomes 0455/11 Oct/Nov 2008

28 A high proportion of people in a developing country have very low incomes. Which government policy would help reduce this level of poverty? A decreasing the tax on goods and services B decreasing housing subsidies C increasing import duties D increasing inheritance tax

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2008

Q24 · When is there a budget surplus? 0455/11 Oct/Nov 2008

29 When is there a budget surplus? A when government expenditure is greater than government revenue B when government revenue is greater than government expenditure C when imports are greater than exports D when exports are greater than imports

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2008

Q25 · A country has different rates of income tax depending on the level of income earned 0455/11 Oct/Nov 2009

19 A country has different rates of income tax depending on the level of income earned. The highest rate of income tax is cut from 40 % to 38 %. From this statement it can be deduced that taxation will become A less indirect. B less progressive. C less regressive. D more difficult to evade.

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2009

Q26 · What is a direct tax? 0455/11 May/June 2010

19 What is a direct tax? A a tax on electricity B a tax on imported goods C a tax on services D a tax on income and wealth

1 marks

Answer: D

This question in 0455/11 May/June 2010

Q27 · What is a direct tax? 0455/12 May/June 2010

20 What is a direct tax? A a tax on electricity B a tax on imported goods C a tax on services D a tax on income and wealth

1 marks

Answer: D

This question in 0455/12 May/June 2010

Q28 · The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2… 0455/11 Oct/Nov 2010

8 The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the price to the consumer rises from $4 to $5. S2 S1 price 5 $ 4 3 D 0 75 100 quantity What is the total tax yield to the government? A $75 B $150 C $200 D $375

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2010

Q29 · Direct taxes can be used to A place the burden of tax on sellers not buyers 0455/11 Oct/Nov 2010

19 Direct taxes can be used to A place the burden of tax on sellers not buyers. B protect domestic industries from foreign competition. C raise revenue without affecting the number of hours employees work. D redistribute incomes from rich to poor.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2010

Q30 · Brazil is a highly taxed economy 0455/11 Oct/Nov 2010

20 Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the government were to cut tax rates, the government would actually receive more tax revenue. Why may cutting taxes increase revenue? A It may encourage emigration. B It may increase the tax burden. C It may lead to a fall in investment. D It may reduce tax evasion.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2010

Q31 · Direct taxes can be used to A place the burden of tax on sellers not buyers 0455/12 Oct/Nov 2010

20 Direct taxes can be used to A place the burden of tax on sellers not buyers. B protect domestic industries from foreign competition. C raise revenue without affecting the number of hours employees work. D redistribute incomes from rich to poor.

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2010

Q32 · Direct taxes can be used to A place the burden of tax on sellers not buyers 0455/13 Oct/Nov 2010

21 Direct taxes can be used to A place the burden of tax on sellers not buyers. B protect domestic industries from foreign competition. C raise revenue without affecting the number of hours employees work. D redistribute incomes from rich to poor.

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2010

Q33 · Brazil is a highly taxed economy 0455/13 Oct/Nov 2010

22 Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the government were to cut tax rates, the government would actually receive more tax revenue. Why may cutting taxes increase revenue? A It may encourage emigration. B It may increase the tax burden. C It may lead to a fall in investment. D It may reduce tax evasion.

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2010

Q34 · In a country where the demand for petrol (gas) is price-inelastic, the incidence of any… 0455/11 May/June 2011

7 In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in petrol tax will be mainly on A the company that refines the oil. B the motorist who buys the petrol. C the petrol station that sells the petrol. D the wholesale company that stores the petrol.

1 marks

Answer: B

This question in 0455/11 May/June 2011

Q35 · When is a direct tax described as progressive? 0455/11 May/June 2011

21 When is a direct tax described as progressive? A when the government changes the basic rate of tax in each budget B when the government taxes companies rather than individuals C when the tax takes a larger proportion of earnings as earnings increase D when the tax takes a smaller proportion of earnings as earnings increase

1 marks

Answer: C

This question in 0455/11 May/June 2011

Q36 · During 2009 some governments adopted policies to try to end the recession in their… 0455/11 May/June 2011

23 During 2009 some governments adopted policies to try to end the recession in their country and increase economic growth. Which combination of policies is most likely to achieve this? A lower taxes and decrease government spending B lower taxes and increase government spending C raise taxes and decrease government spending D raise taxes and increase government spending

1 marks

Answer: B

This question in 0455/11 May/June 2011

Q37 · When is a direct tax described as progressive? 0455/12 May/June 2011

20 When is a direct tax described as progressive? A when the government changes the basic rate of tax in each budget B when the government taxes companies rather than individuals C when the tax takes a larger proportion of earnings as earnings increase D when the tax takes a smaller proportion of earnings as earnings increase

1 marks

Answer: C

This question in 0455/12 May/June 2011

Q38 · During 2009 some governments adopted policies to try to end the recession in their… 0455/12 May/June 2011

22 During 2009 some governments adopted policies to try to end the recession in their country and increase economic growth. Which combination of policies is most likely to achieve this? A lower taxes and decrease government spending B lower taxes and increase government spending C raise taxes and decrease government spending D raise taxes and increase government spending

1 marks

Answer: B

This question in 0455/12 May/June 2011

Q39 · When is a direct tax described as progressive? 0455/13 May/June 2011

20 When is a direct tax described as progressive? A when the government changes the basic rate of tax in each budget B when the government taxes companies rather than individuals C when the tax takes a larger proportion of earnings as earnings increase D when the tax takes a smaller proportion of earnings as earnings increase

1 marks

Answer: C

This question in 0455/13 May/June 2011

Q40 · During 2009 some governments adopted policies to try to end the recession in their… 0455/13 May/June 2011

22 During 2009 some governments adopted policies to try to end the recession in their country and increase economic growth. Which combination of policies is most likely to achieve this? A lower taxes and decrease government spending B lower taxes and increase government spending C raise taxes and decrease government spending D raise taxes and increase government spending

1 marks

Answer: B

This question in 0455/13 May/June 2011

Q41 · Wet weather in 2009 led to a fall in the sales of summer clothes 0455/11 Oct/Nov 2011

5 Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT). How would these events be shown on a demand and supply diagram for summer clothes? demand curve supply curve A move to the left move to the right B move to the left no change C move to the right move to the left D no change move to the right

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2011

Q42 · In 2009, the Chinese Government tried to increase household spending 0455/11 Oct/Nov 2011

14 In 2009, the Chinese Government tried to increase household spending. Which policy measure would have been most likely to achieve this objective? A an increase in both direct and indirect taxes B a reduction in subsidies given to manufacturers C a requirement for commercial banks to reduce their lending D a switch from public to private sector provision of health care and pensions

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2011

Q43 · Wet weather in 2009 led to a fall in the sales of summer clothes 0455/12 Oct/Nov 2011

6 Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT). How would these events be shown on a demand and supply diagram for summer clothes? demand curve supply curve A move to the left move to the right B move to the left no change C move to the right move to the left D no change move to the right

1 marks

Answer: A

This question in 0455/12 Oct/Nov 2011

Q44 · In 2009, the Chinese Government tried to increase household spending 0455/12 Oct/Nov 2011

10 In 2009, the Chinese Government tried to increase household spending. Which policy measure would have been most likely to achieve this objective? A an increase in both direct and indirect taxes B a reduction in subsidies given to manufacturers C a requirement for commercial banks to reduce their lending D a switch from public to private sector provision of health care and pensions

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2011

Q45 · A tax on which of the following is usually progressive and is paid by a large number of… 0455/12 Oct/Nov 2011

22 A tax on which of the following is usually progressive and is paid by a large number of tax payers? A company profits B goods and services C incomes D sales of shares

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2011

Q46 · Wet weather in 2009 led to a fall in the sales of summer clothes 0455/13 Oct/Nov 2011

7 Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT). How would these events be shown on a demand and supply diagram for summer clothes? demand curve supply curve A move to the left move to the right B move to the left no change C move to the right move to the left D no change move to the right

1 marks

Answer: A

This question in 0455/13 Oct/Nov 2011

Q47 · In 2009, the Chinese Government tried to increase household spending 0455/13 Oct/Nov 2011

11 In 2009, the Chinese Government tried to increase household spending. Which policy measure would have been most likely to achieve this objective? A an increase in both direct and indirect taxes B a reduction in subsidies given to manufacturers C a requirement for commercial banks to reduce their lending D a switch from public to private sector provision of health care and pensions

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2011

Q48 · A tax on which of the following is usually progressive and is paid by a large number of… 0455/13 Oct/Nov 2011

22 A tax on which of the following is usually progressive and is paid by a large number of tax payers? A company profits B goods and services C incomes D sales of shares

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2011

Q49 · A country has a tax system which places no tax on incomes below $5000, is proportional on… 0455/11 May/June 2012

23 A country has a tax system which places no tax on incomes below $5000, is proportional on incomes between $5000 and $10 000 and is progressive on incomes above $10 000. Which graph illustrates this tax system? A B % of income % of income paid in tax paid in tax 0 5 10 15 0 5 10 15 income $000s income $000s C D % of income % of income paid in tax paid in tax 0 5 10 15 0 5 10 15 income $000s income $000s

1 marks

Answer: A

This question in 0455/11 May/June 2012

Q50 · A country has a tax system which places no tax on incomes below $5000, is proportional on… 0455/12 May/June 2012

23 A country has a tax system which places no tax on incomes below $5000, is proportional on incomes between $5000 and $10 000 and is progressive on incomes above $10 000. Which graph illustrates this tax system? A B % of income % of income paid in tax paid in tax 0 5 10 15 0 5 10 15 income $000s income $000s C D % of income % of income paid in tax paid in tax 0 5 10 15 0 5 10 15 income $000s income $000s

1 marks

Answer: A

This question in 0455/12 May/June 2012

Q51 · What would be most likely to reduce the rate of inflation? 0455/13 May/June 2012

20 What would be most likely to reduce the rate of inflation? A an increase in direct taxes B an increase in government expenditure C an increase in indirect taxes D an increase in the budget deficit

1 marks

Answer: A

This question in 0455/13 May/June 2012

Q52 · A government wishes to stimulate economic recovery 0455/11 Oct/Nov 2012

26 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2012

Q53 · A country has a proportional system of taxation 0455/11 Oct/Nov 2012

27 A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise to $12 000? A $120 B $500 C $1200 D $7500

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2012

Q54 · The graph shows government revenue and spending in a country, as a percentage of GDP… 0455/11 Oct/Nov 2012

28 The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 42 % of 40 GDP 38 36 government revenue 34 32 2004 2005 2006 2007 2008 2009 2010 2011 year What can be concluded from the graph? A The balance of payments position improved. B The borrowing of the government increased. C The economy went into recession (economic downturn). D The government budget moved from deficit to surplus.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2012

Q55 · A government wishes to stimulate economic recovery 0455/12 Oct/Nov 2012

21 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2012

Q56 · A country has a proportional system of taxation 0455/12 Oct/Nov 2012

22 A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise to $12 000? A $120 B $500 C $1200 D $7500

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2012

Q57 · The graph shows government revenue and spending in a country, as a percentage of GDP… 0455/12 Oct/Nov 2012

23 The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 42 % of 40 GDP 38 36 government revenue 34 32 2004 2005 2006 2007 2008 2009 2010 2011 year What can be concluded from the graph? A The balance of payments position improved. B The borrowing of the government increased. C The economy went into recession (economic downturn). D The government budget moved from deficit to surplus.

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2012

Q58 · A country has a proportional system of taxation 0455/13 Oct/Nov 2012

22 A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise to $12 000? A $120 B $500 C $1200 D $7500

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2012

Q59 · The graph shows government revenue and spending in a country, as a percentage of GDP… 0455/13 Oct/Nov 2012

23 The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 42 % of 40 GDP 38 36 government revenue 34 32 2004 2005 2006 2007 2008 2009 2010 2011 year What can be concluded from the graph? A The balance of payments position improved. B The borrowing of the government increased. C The economy went into recession (economic downturn). D The government budget moved from deficit to surplus.

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2012

Q60 · In an economic recession, which policy might be adopted to reduce unemployment? 0455/12 May/June 2013

24 In an economic recession, which policy might be adopted to reduce unemployment? A an increase in foreign exchange rates B an increase in interest rates C a reduction in import duty D a reduction in tax rates

1 marks

Answer: D

This question in 0455/12 May/June 2013

Q61 · In the first six months of 2011 a construction company, Morgan Sindall, saw its profits… 0455/13 May/June 2013

8 In the first six months of 2011 a construction company, Morgan Sindall, saw its profits fall. Part of the reason was the increased competition from foreign competitors. Which government policy is most likely to help such a company? A increasing benefits to the unemployed B increasing tax-free allowances on new building projects C putting a quota on imported raw materials used by the company D raising interest rates

1 marks

Answer: B

This question in 0455/13 May/June 2013

Q62 · Which combination of government policies is most likely to be successful at reducing… 0455/11 Oct/Nov 2013

8 Which combination of government policies is most likely to be successful at reducing unemployment? A budgeting for a surplus and lowering interest rates B budgeting for a deficit and raising interest rates C budgeting for a surplus and raising interest rates D budgeting for a deficit and lowering interest rates

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2013

Q63 · A government wishes to raise the general standard of living in its country 0455/11 Oct/Nov 2013

9 A government wishes to raise the general standard of living in its country. In the short run, which policy would be the most likely to achieve this aim? A preventing the merger of two companies into a monopoly B raising taxation to repay government debts C reducing the rate of income tax while maintaining the services it provides D spending more on roads in rural areas rather than in city centres

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2013

Q64 · Which combination of government policies is most likely to be successful at reducing… 0455/12 Oct/Nov 2013

22 Which combination of government policies is most likely to be successful at reducing unemployment? A budgeting for a surplus and lowering interest rates B budgeting for a deficit and raising interest rates C budgeting for a surplus and raising interest rates D budgeting for a deficit and lowering interest rates

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2013

Q65 · A government wishes to raise the general standard of living in its country 0455/12 Oct/Nov 2013

23 A government wishes to raise the general standard of living in its country. In the short run, which policy would be the most likely to achieve this aim? A preventing the merger of two companies into a monopoly B raising taxation to repay government debts C reducing the rate of income tax while maintaining the services it provides D spending more on roads in rural areas rather than in city centres

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2013

Q66 · A government wishes to raise the general standard of living in its country 0455/13 Oct/Nov 2013

23 A government wishes to raise the general standard of living in its country. In the short run, which policy would be the most likely to achieve this aim? A preventing the merger of two companies into a monopoly B raising taxation to repay government debts C reducing the rate of income tax while maintaining the services it provides D spending more on roads in rural areas rather than in city centres

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2013

Q67 · A government collects the following revenue in a year 0455/11 May/June 2014

19 A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise duties 50 What is the amount of indirect tax revenue? A $30 m B $70 m C $100 m D $500 m

1 marks

Answer: C

This question in 0455/11 May/June 2014

Q68 · Which pair of government actions combines a fiscal policy with a supply-side policy? 0455/12 May/June 2014

18 Which pair of government actions combines a fiscal policy with a supply-side policy? A changing government spending with changing interest rates B cutting tax rates with providing information on job vacancies C limiting bank lending with the privatisation of industry D restricting credit with less control over labour markets

1 marks

Answer: B

This question in 0455/12 May/June 2014

Q69 · A government collects the following revenue in a year 0455/12 May/June 2014

19 A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise duties 50 What is the amount of indirect tax revenue? A $30 m B $70 m C $100 m D $500 m

1 marks

Answer: C

This question in 0455/12 May/June 2014

Q70 · A government collects the following revenue in a year 0455/13 May/June 2014

20 A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise duties 50 What is the amount of indirect tax revenue? A $30 m B $70 m C $100 m D $500 m

1 marks

Answer: C

This question in 0455/13 May/June 2014

Q71 · The following is a headline from the newspaper 0455/11 Oct/Nov 2014

7 The following is a headline from the newspaper. Car drivers to pay higher taxes What will result from an increased tax on cars? A increased employment in the car industry B increased petrol (gas) sales C reduced external costs of car use D reduced number of bus journeys

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2014

Q72 · In 2011 the Egyptian Government increased the top rate of income tax 0455/11 Oct/Nov 2014

15 In 2011 the Egyptian Government increased the top rate of income tax. What is likely to have been the main aim of this policy measure? A a reallocation of resources from producing necessities to producing luxury products B a redistribution of income from the rich to the poor C a reduction in the deficit on the current account of the balance of payments D a reduction in the level of cost-push inflation

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2014

Q73 · What describes a regressive tax? 0455/11 Oct/Nov 2014

16 What describes a regressive tax? A It is paid by a higher proportion of high income earners. B It is paid by a higher proportion of low income earners. C It takes a higher proportion from high incomes. D It takes a higher proportion from low incomes.

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2014

Q74 · The table shows the tax paid at different levels of income 0455/11 Oct/Nov 2014

19 The table shows the tax paid at different levels of income. income amount of tax ($) ($) 6000 600 7000 700 8000 900 9000 1100 Which describes this tax? A progressive at all levels of income B proportional at all levels of income C proportional at lower incomes, progressive at higher incomes D proportional at lower incomes, regressive at higher incomes

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2014

Q75 · What describes a regressive tax? 0455/12 Oct/Nov 2014

17 What describes a regressive tax? A It is paid by a higher proportion of high income earners. B It is paid by a higher proportion of low income earners. C It takes a higher proportion from high incomes. D It takes a higher proportion from low incomes.

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2014

Q76 · In 2011 the Egyptian Government increased the top rate of income tax 0455/12 Oct/Nov 2014

18 In 2011 the Egyptian Government increased the top rate of income tax. What is likely to have been the main aim of this policy measure? A a reallocation of resources from producing necessities to producing luxury products B a redistribution of income from the rich to the poor C a reduction in the deficit on the current account of the balance of payments D a reduction in the level of cost-push inflation

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2014

Q77 · The table shows the tax paid at different levels of income 0455/12 Oct/Nov 2014

19 The table shows the tax paid at different levels of income. income amount of tax ($) ($) 6000 600 7000 700 8000 900 9000 1100 Which describes this tax? A progressive at all levels of income B proportional at all levels of income C proportional at lower incomes, progressive at higher incomes D proportional at lower incomes, regressive at higher incomes

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2014

Q78 · What describes a regressive tax? 0455/13 Oct/Nov 2014

17 What describes a regressive tax? A It is paid by a higher proportion of high income earners. B It is paid by a higher proportion of low income earners. C It takes a higher proportion from high incomes. D It takes a higher proportion from low incomes.

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2014

Q79 · The table shows the tax paid at different levels of income 0455/13 Oct/Nov 2014

19 The table shows the tax paid at different levels of income. income amount of tax ($) ($) 6000 600 7000 700 8000 900 9000 1100 Which describes this tax? A progressive at all levels of income B proportional at all levels of income C proportional at lower incomes, progressive at higher incomes D proportional at lower incomes, regressive at higher incomes

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2014

Q80 · The government reduces the rate of income tax and increases the rate of tax on producers 0455/11 May/June 2015

19 The government reduces the rate of income tax and increases the rate of tax on producers. From the initial equilibrium point X, which letter indicates the new equilibrium point in the market? S2 B A S1 price S3 X C D D2 D1 D3 O quantity

1 marks

Answer: B

This question in 0455/11 May/June 2015

Q81 · Which policy combination will have the greatest impact on increasing the level of total… 0455/13 May/June 2015

16 Which policy combination will have the greatest impact on increasing the level of total spending in the economy? government taxation spending A decreased decreased B decreased increased C increased decreased D increased increased

1 marks

Answer: B

This question in 0455/13 May/June 2015

Q82 · A toy company bought a $750 000 batch of raw plastic from a local firm and moulded it… 0455/13 May/June 2015

17 A toy company bought a $750 000 batch of raw plastic from a local firm and moulded it into toys. The total revenue from the toys was $1 000 000. The government demanded that the company pay tax on this action. What is the most likely tax that the company has to pay? A capital gains tax B goods and services (value added) tax C import duty D income tax

1 marks

Answer: B

This question in 0455/13 May/June 2015

Q83 · The diagram shows the percentage of income taken by a tax at different levels of income 0455/11 Oct/Nov 2015

16 The diagram shows the percentage of income taken by a tax at different levels of income. % paid in tax tax O income What term is used to describe the tax? A indirect B progressive C proportional D regressive

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2015

Q84 · The diagram shows the imposition of a tax of UZ on a good 0455/11 Oct/Nov 2015

18 The diagram shows the imposition of a tax of UZ on a good. St S T U price W V E Y Z D O Qt Q quantity Which area shows the government’s tax revenue? A TUEV B TUEZY C TUWV D TUZY

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2015

Q85 · A government decided to increase its spending on building schools and hospitals 0455/11 Oct/Nov 2015

19 A government decided to increase its spending on building schools and hospitals. Which aim of government policy is most likely to be achieved by this increase? A a balance of payments surplus B a stronger exchange rate C economic growth D price stability

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2015

Q86 · What is likely to fall when the rate of unemployment in a country falls? 0455/11 Oct/Nov 2015

22 What is likely to fall when the rate of unemployment in a country falls? A business confidence B consumer spending C government budget deficit D government revenue from taxes

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2015

Q87 · How do high direct taxes affect spending and how do high interest rates affect saving by… 0455/12 Oct/Nov 2015

9 How do high direct taxes affect spending and how do high interest rates affect saving by wage- earners? spending saving A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2015

Q88 · A government wishes to close the gap between the earnings of the rich and the poor 0455/12 Oct/Nov 2015

18 A government wishes to close the gap between the earnings of the rich and the poor. What should it do to achieve this aim? A increase progressive taxation B increase the rate of interest C increase the rate of sales tax D increase the supply of money

1 marks

Answer: A

This question in 0455/12 Oct/Nov 2015

Q89 · A government decided to increase its spending on building schools and hospitals 0455/12 Oct/Nov 2015

19 A government decided to increase its spending on building schools and hospitals. Which aim of government policy is most likely to be achieved by this increase? A a balance of payments surplus B a stronger exchange rate C economic growth D price stability

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2015

Q90 · In 2014, a plan for a major new rail link funded by central and regional government was… 0455/12 Feb/March 2016

6 In 2014, a plan for a major new rail link funded by central and regional government was announced. It would involve the redevelopment of a city area, generate 14 000 jobs and allow the development of 2000 homes and offices for private businesses. What economic concepts are indicated directly in the above statement? A budget surplus and inflation B factors of production and multinational companies C fiscal policy and mixed economy D regional unemployment and average wage rates

1 marks

Answer: C

This question in 0455/12 Feb/March 2016

Q91 · The table shows information for two workers 0455/12 Feb/March 2016

11 The table shows information for two workers. doctor window cleaner annual income ($) 60 000 24 000 total deductions ($) 10 000 8 000 Both workers save 10% of their disposable income. How much is this in each case? doctor window cleaner A $1 000 $800 B $5 000 $1 600 C $6 000 $2 400 D $50 000 $16 000

1 marks

Answer: B

This question in 0455/12 Feb/March 2016

Q92 · Other things being equal, what is likely to decrease public spending? 0455/12 Feb/March 2016

16 Other things being equal, what is likely to decrease public spending? A an increase in the age of retirement B an increase in the birth rate C an increase in the school-leaving age D an increase in unemployment

1 marks

Answer: A

This question in 0455/12 Feb/March 2016

Q93 · When is a tax regressive? 0455/12 Feb/March 2016

17 When is a tax regressive? A when some goods have a lower tax than others B when the tax as a proportion of income decreases as income increases C when the tax is linked to the rate of inflation D when the tax is on incomes rather than on goods or services

1 marks

Answer: B

This question in 0455/12 Feb/March 2016

Q94 · The Government of India wishes to help the very poorest people 0455/12 Feb/March 2016

18 The Government of India wishes to help the very poorest people. Which policy would be most likely to achieve this? A lowering capital gains tax B lowering housing subsidies C lowering indirect taxation D lowering inheritance tax

1 marks

Answer: C

This question in 0455/12 Feb/March 2016

Q95 · A government wishes to stimulate economic recovery 0455/11 May/June 2016

16 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

1 marks

Answer: B

This question in 0455/11 May/June 2016

Q96 · A government decides to make two changes to its taxation policies 0455/11 May/June 2016

18 A government decides to make two changes to its taxation policies. It lowers the tax on petrol and raises the tax on food. How do these changes affect the regressive nature of the taxes? lower petrol higher food tax tax A less regressive less regressive B less regressive more regressive C more regressive less regressive D more regressive more regressive

1 marks

Answer: B

This question in 0455/11 May/June 2016

Q97 · The table shows a government’s receipts from taxation 0455/11 May/June 2016

19 The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 insurance policy tax 10 sales tax (VAT) 400 What is the total amount of revenue raised by indirect taxes? A $95 m B $300 m C $400 m D $495 m

1 marks

Answer: D

This question in 0455/11 May/June 2016

Q98 · A government wishes to stimulate economic recovery 0455/12 May/June 2016

16 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

1 marks

Answer: B

This question in 0455/12 May/June 2016

Q99 · A government fixes the rate of income tax at $0.20 per dollar earned 0455/12 May/June 2016

17 A government fixes the rate of income tax at $0.20 per dollar earned. What describes this type of taxation? A indirect B progressive C proportional D regressive

1 marks

Answer: C

This question in 0455/12 May/June 2016

Q100 · The table shows a government’s receipts from taxation 0455/12 May/June 2016

19 The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m

1 marks

Answer: C

This question in 0455/12 May/June 2016

Q101 · A government wishes to stimulate economic recovery 0455/13 May/June 2016

16 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

1 marks

Answer: B

This question in 0455/13 May/June 2016

Q102 · The table shows a government’s receipts from taxation 0455/13 May/June 2016

18 The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by direct taxes? A $135 m B $200 m C $300 m D $350 m

1 marks

Answer: D

This question in 0455/13 May/June 2016

Q103 · Which policy combination will be the most effective if a government wishes to increase… 0455/13 May/June 2016

19 Which policy combination will be the most effective if a government wishes to increase the level of employment? A decrease general taxation and increase the rate of interest B decrease general taxation and decrease the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest.

1 marks

Answer: B

This question in 0455/13 May/June 2016

Q104 · The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries 0455/12 Oct/Nov 2016

18 The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries. From this information, which country had the highest percentage of direct taxation as a percentage of GDP? tax on tax on goods income tax tax on business and services % dividends % profits % % A 12 14 2 5 B 14 15 2 14 C 17 13 5 10 D 18 10 1 10

1 marks

This question in 0455/12 Oct/Nov 2016

Q105 · A government introduces state benefits for the unemployed and increases the top rate of… 0455/12 Oct/Nov 2016

25 A government introduces state benefits for the unemployed and increases the top rate of income tax to pay for the benefits. What effect will these changes have on poverty and the tax system? poverty tax system A increase make it more progressive B increase make it more regressive C reduce make it more progressive D reduce make it more regressive

1 marks

This question in 0455/12 Oct/Nov 2016

Q106 · A government decides to increase the rate of income tax and spend the extra revenue on… 0455/13 Oct/Nov 2016

17 A government decides to increase the rate of income tax and spend the extra revenue on providing training colleges. How might this be described? A as fiscal and monetary policy B as fiscal and supply-side policy C as fiscal, monetary and supply-side policy D as monetary and supply-side policy

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2016

Q107 · The table shows taxes as percentages of Gross Domestic Product (GDP) for four countries 0455/13 Oct/Nov 2016

19 The table shows taxes as percentages of Gross Domestic Product (GDP) for four countries. From this information, which country had the lowest percentage of direct taxation as a percentage of GDP? tax on income tax tax on tax on goods business % dividends % and services % profits % A 12 14 2 4 B 14 15 2 13 C 17 8 5 9 D 17 13 5 9

1 marks

Answer: A

This question in 0455/13 Oct/Nov 2016

Q108 · The Indian government uses direct and indirect taxation 0455/12 Feb/March 2017

17 The Indian government uses direct and indirect taxation. Which is a direct tax? A corporate (profits) tax B customs duty C goods and services tax D petrol tax

1 marks

Answer: A

This question in 0455/12 Feb/March 2017

Q109 · A worker earns $60 000 a year and pays 25% income tax 0455/12 Feb/March 2017

18 A worker earns $60 000 a year and pays 25% income tax. He spent $2000 on furniture and $5000 on a computer and paid 20% sales tax on each. How much indirect tax did he pay? A $1000 B $1400 C $15 000 D $16 400

1 marks

Answer: B

This question in 0455/12 Feb/March 2017

Q110 · When is a tax progressive? 0455/11 May/June 2017

16 When is a tax progressive? A when some goods have a higher tax than others B when the rate of tax increases as income increases C when the tax is linked to the rate of inflation D when the tax is on incomes rather than on goods or services

1 marks

Answer: B

This question in 0455/11 May/June 2017

Q111 · A government intends to improve skills by offering free training to school leavers at age… 0455/11 May/June 2017

17 A government intends to improve skills by offering free training to school leavers at age 16 until they reach 18 years. It proposes to pay for this by taxing the profits of firms. Which policies do these proposals involve? provision of payment for skills training skills training A fiscal fiscal B monetary monetary C supply-side fiscal D supply-side monetary

1 marks

Answer: C

This question in 0455/11 May/June 2017

Q112 · The charts relate to the Financial Statement of the government of New Zealand for 2014 0455/11 May/June 2017

19 The charts relate to the Financial Statement of the government of New Zealand for 2014. sales of goods state and services other enterprises tax from 18% $21.0b $20.7b incomes 31% $89.4 $92.2 other billion (b) billion (b) revenue total total 14% revenue expenses education health $12.3b $14.9b corporate tax goods and 10% other services tax welfare taxes 18% $23.3b 9% What can be concluded? A Expenditure on welfare was higher than the combined expenditure on education and health. B The government was $2.8 billion in surplus. C The largest source of the government’s income was from direct taxation. D The number of business corporations was very small.

1 marks

Answer: C

This question in 0455/11 May/June 2017

Q113 · The information below refers to an economy for a financial year 0455/11 May/June 2017

22 The information below refers to an economy for a financial year. government expenditure = $2866 million government revenue = $1940 million What was the budget balance of the government in that year? A $926 million in deficit B $4806 million in deficit C $926 million in surplus D $4806 million in surplus

1 marks

Answer: A

This question in 0455/11 May/June 2017

Q114 · The government increases the rate of income tax and decreases the rate of a sales tax… 0455/12 May/June 2017

10 The government increases the rate of income tax and decreases the rate of a sales tax (VAT). From the initial equilibrium point of X, which letter indicates the new equilibrium point in a market for normal goods? price S1 B A S X S2 C D D1 D D2 O quantity

1 marks

Answer: D

This question in 0455/12 May/June 2017

Q115 · A government wishes to try to make the distribution of income in the country more equal 0455/12 May/June 2017

17 A government wishes to try to make the distribution of income in the country more equal. Which policy would be most likely to achieve this? A reducing housing subsidies B reducing indirect tax on food C reducing inheritance tax D reducing tax on the dividends on stocks and shares

1 marks

Answer: B

This question in 0455/12 May/June 2017

Q116 · Which policy combination will be the most effective if a government wishes to increase… 0455/12 May/June 2017

19 Which policy combination will be the most effective if a government wishes to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest

1 marks

Answer: A

This question in 0455/12 May/June 2017

Q117 · The information below refers to an economy for a financial year 0455/12 May/June 2017

22 The information below refers to an economy for a financial year. government expenditure = $2866 million government revenue = $1940 million What was the budget balance of the government in that year? A $926 million in deficit B $4806 million in deficit C $926 million in surplus D $4806 million in surplus

1 marks

Answer: A

This question in 0455/12 May/June 2017

Q118 · When is a tax progressive? 0455/13 May/June 2017

16 When is a tax progressive? A when some goods have a higher tax than others B when the rate of tax increases as income increases C when the tax is linked to the rate of inflation D when the tax is on incomes rather than on goods or services

1 marks

Answer: B

This question in 0455/13 May/June 2017

Q119 · Why can government spending be described both as a fiscal policy and a supply-side policy? 0455/13 May/June 2017

17 Why can government spending be described both as a fiscal policy and a supply-side policy? A It has a nationwide effect and can control firms’ production possibility curves. B It is announced in the budget and can increase the economy’s ability to produce. C It is determined by the central bank and can raise the cost of production of firms. D It must equal tax revenue and can regulate the amount of the money supply.

1 marks

Answer: B

This question in 0455/13 May/June 2017

Q120 · A government cuts the rate of income tax 0455/13 May/June 2017

19 A government cuts the rate of income tax. What effect is this likely to have on tax evasion and revenue from indirect taxes? revenue from tax evasion indirect taxes A decrease increase B decrease no effect C increase increase D increase no effect

1 marks

Answer: A

This question in 0455/13 May/June 2017

Q121 · The information below refers to an economy for a financial year 0455/13 May/June 2017

22 The information below refers to an economy for a financial year. government expenditure = $2866 million government revenue = $1940 million What was the budget balance of the government in that year? A $926 million in deficit B $4806 million in deficit C $926 million in surplus D $4806 million in surplus

1 marks

Answer: A

This question in 0455/13 May/June 2017

Q122 · The graph shows the percentage of income paid in taxation 0455/11 Oct/Nov 2017

18 The graph shows the percentage of income paid in taxation. Which line represents a proportional tax? A % income B paid in taxation C D O income

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2017

Q123 · An economy is predicted to grow at a rate of 3% during the next year 0455/11 Oct/Nov 2017

21 An economy is predicted to grow at a rate of 3% during the next year. What is most likely to cause this growth? A an increase in expenditure B an increase in interest rates C an increase in sales (goods and services) tax D an increase in the government’s budget surplus

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2017

Q124 · What, when increased, will help a government to reduce the rate of inflation? 0455/12 Oct/Nov 2017

16 What, when increased, will help a government to reduce the rate of inflation? A budget deficit B consumer spending C income tax D pensions

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2017

Q125 · A worker earns $40 000 a year and pays 20% income tax 0455/12 Oct/Nov 2017

19 A worker earns $40 000 a year and pays 20% income tax. He spends $5000 on electrical goods and $10 000 on a car, and pays 20% sales tax on each. How much indirect tax does he pay? A $3000 B $5000 C $8000 D $11 000

1 marks

Answer: A

This question in 0455/12 Oct/Nov 2017

Q126 · What, when increased, will help a government to reduce the rate of inflation? 0455/13 Oct/Nov 2017

16 What, when increased, will help a government to reduce the rate of inflation? A budget deficit B consumer spending C income tax D pensions

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2017

Q127 · Which policy is most likely to increase the level of economic activity? 0455/13 Oct/Nov 2017

17 Which policy is most likely to increase the level of economic activity? A increasing the exchange rate B increasing the rate of interest C reducing government spending D reducing the general tax level

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2017

Q128 · The graph shows the percentage of income paid in taxation 0455/13 Oct/Nov 2017

18 The graph shows the percentage of income paid in taxation. Which line represents a proportional tax? A % income B paid in taxation C D O income

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2017

Q129 · A government collects the following revenue in a year 0455/13 Oct/Nov 2017

19 A government collects the following revenue in a year. $m customs duties 100 taxes on goods 200 taxes on income 400 taxes on services 300 What is the amount of indirect tax revenue? A $200 m B $400 m C $500 m D $600 m

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2017

Q130 · The table shows the amount of tax to be paid at different weekly incomes 0455/11 May/June 2018

18 The table shows the amount of tax to be paid at different weekly incomes. weekly income ($) 100 150 200 250 weekly tax ($) 20 30 36 40 Which statement describes the system of income tax as income rises over this range? A It is progressive throughout. B It is proportional then becomes progressive. C It is proportional then becomes regressive. D It is regressive throughout.

1 marks

Answer: C

This question in 0455/11 May/June 2018

Q131 · A government has the following revenue 0455/12 May/June 2018

18 A government has the following revenue. revenue ($ m) corporation profits tax 20 inheritance tax 30 duty on imports 40 income tax 50 sales tax (VAT) 200 What is the total amount of indirect tax revenue? A $140 m B $200 m C $240 m D $270 m

1 marks

Answer: C

This question in 0455/12 May/June 2018

Q132 · A government seeks to redistribute income from the rich to the poor 0455/13 May/June 2018

18 A government seeks to redistribute income from the rich to the poor. Which combination of policy measures is most likely to achieve this aim? income tax sales tax state benefit A decrease decrease decrease B decrease increase increase C increase decrease increase D increase increase decrease

1 marks

Answer: C

This question in 0455/13 May/June 2018

Q133 · What is a disadvantage of direct taxes? 0455/11 Oct/Nov 2018

16 What is a disadvantage of direct taxes? A They can be a disincentive to work. B They can be based on people’s ability to pay. C They can be a major source of tax revenue. D They can be progressive.

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2018

Q134 · When is a government said to balance its budget? 0455/11 Oct/Nov 2018

17 When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all regions of the economy C when its total income equals its total expenditure D when total exports equal total imports

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2018

Q135 · When is a government said to balance its budget? 0455/12 Oct/Nov 2018

17 When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all regions of the economy C when its total income equals its total expenditure D when total exports equal total imports

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2018

Q136 · The table shows the amount of tax paid as income rises in four countries, A–D 0455/12 Oct/Nov 2018

18 The table shows the amount of tax paid as income rises in four countries, A–D. Which country has a progressive tax? amount of tax (US$) paid on income of: 10 000 20 000 30 000 40 000 50 000 A 2 000 4 000 6 000 8 000 10 000 B 2 000 6 000 12 000 18 000 25 000 C 4 000 4 500 5 000 5 500 6 000 D 4 000 7 000 9 000 10 000 12 000

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2018

Q137 · What is most likely to be an example of a progressive tax? 0455/13 Oct/Nov 2018

16 What is most likely to be an example of a progressive tax? A customs duties on imported goods B excise duties on cigarettes C income tax D sales tax

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2018

Q138 · When is a government said to balance its budget? 0455/13 Oct/Nov 2018

17 When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all regions of the economy C when its total income equals its total expenditure D when total exports equal total imports

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2018

Q139 · A government aims to boost production and increase sales of steel by subsidising private… 0455/13 Oct/Nov 2018

18 A government aims to boost production and increase sales of steel by subsidising private producers. A subsidy equal to W – Z per tonne is paid. According to the diagram, what would be the value of sales of steel after the subsidy? price supply of steel (per tonne W supply after subsidy of steel) Z P P1 demand for steel O Q Q1 quantity (tonnes of steel) A OP × OQ B OP1 × OQ1 C WZ × OQ D WZ × OQ1

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2018

Q140 · What is an example of an expansionary fiscal policy? 0455/12 Feb/March 2019

17 What is an example of an expansionary fiscal policy? A decreased budget deficit B higher interest rates C increased money supply D reduced tax rates

1 marks

Answer: D

This question in 0455/12 Feb/March 2019

Q141 · Which policy would be most likely to reduce unemployment in the short run? 0455/12 Feb/March 2019

19 Which policy would be most likely to reduce unemployment in the short run? A a programme of privatisation B a reduction in the standard rate of income tax C grants to firms to research new technology D removal of all restrictions on imports into the country

1 marks

Answer: B

This question in 0455/12 Feb/March 2019

Q142 · A government increases the rate of income tax in order to pay for extra transfer… 0455/11 May/June 2019

16 A government increases the rate of income tax in order to pay for extra transfer payments, including cash benefits to the poor. What must occur as a result of this? A It changes the distribution of income. B It ensures the equality of incomes. C It leads to more people paying income taxes. D It reduces the level of unemployment.

1 marks

Answer: A

This question in 0455/11 May/June 2019

Q143 · The standard rate for Value Added Tax (sales tax) is 20% in a country 0455/11 May/June 2019

17 The standard rate for Value Added Tax (sales tax) is 20% in a country. Different consumers buying the same product have to pay the same amount of tax. What kind of tax is this? A direct B progressive C proportional D regressive

1 marks

Answer: D

This question in 0455/11 May/June 2019

Q144 · The diagram shows the demand curve D1 and supply curve S1 for a good 0455/11 May/June 2019

18 The diagram shows the demand curve D1 and supply curve S1 for a good. The government introduces a subsidy to encourage production. price S1 $ S2 30 25 20 D1 0 4 5 quantity What will be the total cost of the subsidy to the government? A $40 B $50 C $100 D $150

1 marks

Answer: B

This question in 0455/11 May/June 2019

Q145 · A country is experiencing a period of full employment 0455/11 May/June 2019

22 A country is experiencing a period of full employment. What is most likely to lead to an increase in demand-pull inflation? A an increase in government spending B an increase in imports C an increase in income tax rates D an increase in sales tax

1 marks

Answer: A

This question in 0455/11 May/June 2019

Q146 · Which policy is most likely to reduce relative poverty? 0455/11 May/June 2019

24 Which policy is most likely to reduce relative poverty? A make income tax rates less progressive B reduce benefit payments C reduce the minimum wage D reduce the rate of sales tax

1 marks

Answer: D

This question in 0455/11 May/June 2019

Q147 · The government increases taxation in order to fund an increase in spending on government… 0455/12 May/June 2019

17 The government increases taxation in order to fund an increase in spending on government training schemes. Which policy combination would this involve? A fiscal policy and monetary policy only B fiscal policy and supply-side policy only C monetary policy and supply-side policy only D monetary policy, supply-side policy and fiscal policy

1 marks

Answer: B

This question in 0455/12 May/June 2019

Q148 · Which form of taxation always takes an increasing percentage of the taxpayer’s income as… 0455/13 May/June 2019

16 Which form of taxation always takes an increasing percentage of the taxpayer’s income as it rises? A indirect B progressive C proportionate D regressive

1 marks

Answer: B

This question in 0455/13 May/June 2019

Q149 · One aim of government policy is to redistribute income through taxation in order to… 0455/11 Oct/Nov 2019

16 One aim of government policy is to redistribute income through taxation in order to reduce inequality. Which policy will achieve this aim? A Impose a tax of $0.20 on every dollar earned. B Increase the tax-free allowances after which tax must be paid progressively. C Introduce a tax on all food. D Provide an incentive to earn by reducing taxes for the highest paid.

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2019

Q150 · Which actions would be likely to increase government expenditure and reduce revenues from… 0455/11 Oct/Nov 2019

18 Which actions would be likely to increase government expenditure and reduce revenues from taxation? government expenditure tax revenues A improve health facilities for the elderly encourage people to reduce their spending B increase the amount of the state pension increase VAT (sales tax) C provide free bus transport for retired people encourage people to work beyond retirement D raise the age of retirement decrease bus fares

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2019

Q151 · The diagram shows the impact of a government imposing an indirect tax on a good 0455/11 Oct/Nov 2019

19 The diagram shows the impact of a government imposing an indirect tax on a good. The original demand curve is D1 and original supply curve is S1. price S2 $ S1 60 50 40 D1 0 80 100 quantity What is the total tax revenue gained by the government? A $1600 B $3200 C $4800 D $5000

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2019

Q152 · Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive… 0455/12 Oct/Nov 2019

16 Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive when comparing high-income and low-income purchasers? A High-income purchasers pay a higher percentage of their income in tax. B High-income purchasers pay a lower percentage of their income in tax. C Low-income purchasers pay a lower percentage of their income in tax. D Low-income purchasers and high-income purchasers pay the same percentage of their income in tax.

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2019

Q153 · Which combination of policy measures would be effective in reducing the effects of a… 0455/12 Oct/Nov 2019

18 Which combination of policy measures would be effective in reducing the effects of a recession? A a reduction in interest rates and a reduction in income tax B a reduction in interest rates and an increase in income tax C an increase in interest rates and a reduction in income tax D an increase in interest rates and an increase in income tax

1 marks

Answer: A

This question in 0455/12 Oct/Nov 2019

Q154 · How would government spending on education be classified? 0455/12 Oct/Nov 2019

19 How would government spending on education be classified? fiscal monetary supply-side policy policy policy A no no yes B no yes no C yes no yes D yes yes no

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2019

Q155 · A government decides to increase tax revenues from consumer expenditure 0455/13 Oct/Nov 2019

16 A government decides to increase tax revenues from consumer expenditure. Which tax will it increase? A capital gains tax B death duties C profits tax D value added tax

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2019

Q156 · A government uses a mixture of fiscal policy measures and supply-side policy measures to… 0455/13 Oct/Nov 2019

17 A government uses a mixture of fiscal policy measures and supply-side policy measures to stimulate growth in the economy. Which combination of policy measures will achieve this? fiscal policy measures supply-side policy measures A increase government expenditure increase skills training B increase government investment increase indirect taxes C increase direct taxation decrease unemployment benefit D increase interest rates decrease money supply

1 marks

Answer: A

This question in 0455/13 Oct/Nov 2019

Q157 · The table shows tax paid at different income levels in an economy 0455/13 Oct/Nov 2019

18 The table shows tax paid at different income levels in an economy. income level tax paid ($) ($) 5 000 500 12 000 2400 20 000 5000 30 000 6000 Which description of the tax system used is correct? A continually progressive B progressive then regressive C proportional D regressive then progressive

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2019

Q158 · What is most likely to cause a more even distribution of income? 0455/12 Feb/March 2020

16 What is most likely to cause a more even distribution of income? A an increase in indirect taxation B an increase in inflation C an increase in managers’ salaries D an increase in progressive taxation

1 marks

This question in 0455/12 Feb/March 2020

Q159 · In the past, governments have adopted policies to try to end a recession in their country… 0455/12 Feb/March 2020

19 In the past, governments have adopted policies to try to end a recession in their country and increase economic growth. Which combination of policies is most likely to achieve this? A lower taxes and decrease government spending B lower taxes and increase government spending C raise taxes and decrease government spending D raise taxes and increase government spending

1 marks

This question in 0455/12 Feb/March 2020

Q160 · When is the budget described as balanced? 0455/11 May/June 2020

17 When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when government spending and government revenue are equal D when the demand for money and the supply of money are equal

1 marks

Answer: C

This question in 0455/11 May/June 2020

Q161 · The government wishes to increase economic growth in its economy 0455/11 May/June 2020

18 The government wishes to increase economic growth in its economy. What would not be likely to achieve this aim? A The central bank encourages bank lending. B The central bank lowers interest rates. C The government increases sales tax (VAT). D The government subsidises new industries.

1 marks

Answer: C

This question in 0455/11 May/June 2020

Q162 · What is not included in public expenditure? 0455/12 May/June 2020

16 What is not included in public expenditure? A capital spending by firms B interest payments on government borrowing C investment in defence by the central government D subsidies to bus companies from local government

1 marks

Answer: A

This question in 0455/12 May/June 2020

Q163 · When is the budget described as balanced? 0455/12 May/June 2020

17 When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when government spending and government revenue are equal D when the demand for money and the supply of money are equal

1 marks

Answer: C

This question in 0455/12 May/June 2020

Q164 · A government increased revenue by increasing taxes on firms 0455/12 May/June 2020

18 A government increased revenue by increasing taxes on firms. Which tax did it increase? A inheritance tax B profits tax C sales tax D value added tax

1 marks

Answer: B

This question in 0455/12 May/June 2020

Q165 · What is not included in public expenditure? 0455/13 May/June 2020

16 What is not included in public expenditure? A capital spending by firms B interest payments on government borrowing C investment in defence by the central government D subsidies to bus companies from local government

1 marks

Answer: A

This question in 0455/13 May/June 2020

Q166 · When is the budget described as balanced? 0455/13 May/June 2020

17 When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when government spending and government revenue are equal D when the demand for money and the supply of money are equal

1 marks

Answer: C

This question in 0455/13 May/June 2020

Q167 · A government has a contractionary fiscal policy to reduce inflation 0455/13 May/June 2020

21 A government has a contractionary fiscal policy to reduce inflation. What will the government increase? A expenditure on infrastructure B income tax rates C personal tax allowances D unemployment benefits

1 marks

Answer: B

This question in 0455/13 May/June 2020

Q168 · Which measure would indicate that an expansionary fiscal policy is being used by the… 0455/11 Oct/Nov 2020

18 Which measure would indicate that an expansionary fiscal policy is being used by the government? A cuts in government spending B higher interest rates C lower interest rates D lower taxes

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2020

Q169 · Some governments in the European Union are trying to reduce unemployment 0455/11 Oct/Nov 2020

20 Some governments in the European Union are trying to reduce unemployment. What should increase to achieve this? A imports of goods B interest rates C public sector spending D taxation of firms

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2020

Q170 · An economy is experiencing rising prices 0455/11 Oct/Nov 2020

22 An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving for income earners B investing more in building infrastructure C issuing more banknotes and coins D reducing indirect taxes

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2020

Q171 · The table shows the tax that an individual would pay at different levels of disposable… 0455/12 Oct/Nov 2020

18 The table shows the tax that an individual would pay at different levels of disposable income. disposable 10 000 20 000 30 000 40 000 income ($) tax ($) 0 2000 4000 6000 Which type of tax is shown in the table? A corporation tax B indirect tax C progressive tax D regressive tax

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2020

Q172 · The government wants to reduce the consumption of cigarettes 0455/12 Oct/Nov 2020

19 The government wants to reduce the consumption of cigarettes. Which policy would be most likely to do this? A increasing a subsidy on cigarettes B increasing income tax C increasing interest rates D increasing the indirect tax on cigarettes

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2020

Q173 · The table shows the rates of unemployment and real GDP growth for an economy in 2014 and… 0455/12 Oct/Nov 2020

21 The table shows the rates of unemployment and real GDP growth for an economy in 2014 and 2018. 2014 2018 rate of 3 10 unemployment (%) rate of real GDP 4 –2 growth (%) Which combination of policy measures would be most effective in returning the economy to the 2014 level of economic activity? A a decrease in direct taxes and an increase in the rate of interest B a decrease in government expenditure and an increase in the rate of interest C an increase in direct taxes and a decrease in the rate of interest D an increase in government expenditure and a decrease in the rate of interest

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2020

Q174 · An economy is experiencing rising prices 0455/12 Oct/Nov 2020

22 An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving for income earners B investing more in building infrastructure C issuing more banknotes and coins D reducing indirect taxes

1 marks

Answer: A

This question in 0455/12 Oct/Nov 2020

Q175 · A government decreased the tax on all goods produced in its country 0455/13 Oct/Nov 2020

18 A government decreased the tax on all goods produced in its country. What is the most likely consequence of this? A a decrease in exports B an increase in imports C an increase in production D a worsening of the balance of trade in goods

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2020

Q176 · A government reduces social security spending by $10 bn in order to increase defence… 0455/12 Feb/March 2021

2 A government reduces social security spending by $10 bn in order to increase defence spending by $10 bn. What is this an example of? A expansionary fiscal policy B market forces C price stability D reallocation of resources

1 marks

Answer: D

This question in 0455/12 Feb/March 2021

Q177 · What is included in a government’s budget? 0455/12 Feb/March 2021

16 What is included in a government’s budget? A the balance of government revenue and government expenditure B the balance of export revenue and import expenditure C the difference between investment and saving D the difference between social benefits and social costs of production

1 marks

Answer: A

This question in 0455/12 Feb/March 2021

Q178 · Tax is charged at 1.45% on all wages earned to pay for basic medical provision 0455/12 Feb/March 2021

21 Tax is charged at 1.45% on all wages earned to pay for basic medical provision. How would this tax be described? A direct and proportional B direct and regressive C indirect and proportional D indirect and regressive

1 marks

Answer: A

This question in 0455/12 Feb/March 2021

Q179 · An economy has a high rate of inflation 0455/11 May/June 2021

16 An economy has a high rate of inflation. In response to this, its government increases income tax. What is the most likely reason for this increase? A to discourage the consumption of harmful goods B to raise money for government spending C to redistribute income D to reduce total demand

1 marks

Answer: D

This question in 0455/11 May/June 2021

Q180 · A government’s revenue grew 8% to $3.25 trillion 0455/11 May/June 2021

18 A government’s revenue grew 8% to $3.25 trillion. Its expenditure was reduced to $3.69 trillion. What can be concluded from this? government state of budget policy aim A deficit increase deficit B deficit reduce deficit C surplus increase surplus D surplus reduce surplus

1 marks

Answer: B

This question in 0455/11 May/June 2021

Q181 · What is a fiscal policy measure? 0455/12 May/June 2021

16 What is a fiscal policy measure? A direct tax B exchange rates C interest rates D regulation

1 marks

Answer: A

This question in 0455/12 May/June 2021

Q182 · A country is experiencing unemployment 0455/12 May/June 2021

18 A country is experiencing unemployment. It has a progressive income tax policy and benefits for the poor. The government aims to increase employment and reduce income inequality. Which fiscal policy measures are most likely to achieve these aims? income tax benefits for the poor A decrease the highest tax rate decrease B increase the highest tax rate decrease C decrease the lowest tax rate increase D increase the lowest tax rate increase

1 marks

Answer: C

This question in 0455/12 May/June 2021

Q183 · What is fiscal policy? 0455/13 May/June 2021

16 What is fiscal policy? A government decisions on money supply and interest rates taken to influence total demand B government decisions on spending and taxation designed to influence total demand C government measures designed to influence total supply in the economy D government regulation of the foreign exchange rate to influence imports

1 marks

Answer: B

This question in 0455/13 May/June 2021

Q184 · The table shows sources of government revenue for an economy 0455/13 May/June 2021

18 The table shows sources of government revenue for an economy. sources of revenue $ billions sale of government assets 100 sales tax 300 tariffs on imports 50 tax on employment income 500 tax on inherited wealth 50 tax on company profits 100 What is the total amount of tax revenue raised by direct taxes? A $600 billion B $650 billion C $950 billion D $1100 billion

1 marks

Answer: B

This question in 0455/13 May/June 2021

Q185 · Which government policies will both reduce the difference in income between low-paid and… 0455/11 Oct/Nov 2021

10 Which government policies will both reduce the difference in income between low-paid and high- paid workers? A a decrease in the maximum wage and a more regressive income tax system B a decrease in the maximum wage and a reduction in trade union power C an increase in the minimum wage and a more progressive income tax system D an increase in the minimum wage and a more regressive income tax system

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2021

Q186 · An economy is operating with all resources fully employed 0455/11 Oct/Nov 2021

17 An economy is operating with all resources fully employed. Which would be an outcome of a significant increase in government expenditure? A deflation B demand-pull inflation C falling output D increased employment

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2021

Q187 · The table shows a government’s receipts from taxation 0455/11 Oct/Nov 2021

19 The table shows a government’s receipts from taxation. $m air passenger duty 10 tax on firms’ profits 100 import duty 75 income tax 200 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2021

Q188 · Which combination of policy measures is most likely to increase the level of employment? 0455/11 Oct/Nov 2021

23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2021

Q189 · What is a cause of demand-pull inflation? 0455/12 Oct/Nov 2021

17 What is a cause of demand-pull inflation? A a surplus of skilled labour B higher government expenditure C higher tax rates D lower net exports

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2021

Q190 · The table shows a government’s receipts from taxation 0455/12 Oct/Nov 2021

19 The table shows a government’s receipts from taxation. $m air passenger duty 10 tax on firms’ profits 100 import duty 75 income tax 200 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2021

Q191 · Which combination of policy measures is most likely to increase the level of employment? 0455/12 Oct/Nov 2021

23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest

1 marks

Answer: A

This question in 0455/12 Oct/Nov 2021

Q192 · The table shows a government’s receipts from taxation 0455/13 Oct/Nov 2021

19 The table shows a government’s receipts from taxation. $m air passenger duty 10 tax on firms’ profits 100 import duty 75 income tax 200 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2021

Q193 · Which combination of policy measures is most likely to increase the level of employment? 0455/13 Oct/Nov 2021

23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest

1 marks

Answer: A

This question in 0455/13 Oct/Nov 2021

Q194 · What is an example of a fiscal policy measure? 0455/11 May/June 2022

17 What is an example of a fiscal policy measure? A increasing the exchange rate B reducing the power of trade unions C reducing the rate of corporation tax D setting a lower interest rate

1 marks

Answer: C

This question in 0455/11 May/June 2022

Q195 · The chart shows a government’s spending in a year 0455/12 May/June 2022

16 The chart shows a government’s spending in a year. 40 000 $ (millions) 35 000 34 006 30 000 25 000 20 000 18 660 15 280 15 000 10 000 5050 5000 2390 0 social security health education law and defence and welfare order What was the total government spending on public goods? A $2390 million B $5050 million C $7440 million D $33 940 million

1 marks

Answer: C

This question in 0455/12 May/June 2022

Q196 · A government wants to reduce both its budget deficit and the amount of poverty in its… 0455/12 May/June 2022

23 A government wants to reduce both its budget deficit and the amount of poverty in its country. Which fiscal policy measure is most likely to achieve both of these aims? A decreasing the rate of progressive income tax B decreasing government spending on welfare benefits C increasing the rate of progressive income tax D increasing government spending on welfare benefits

1 marks

Answer: C

This question in 0455/12 May/June 2022

Q197 · A government decides to increase the indirect tax on petrol 0455/13 May/June 2022

17 A government decides to increase the indirect tax on petrol. Petrol has an inelastic price elasticity of demand. What are likely to be the consequences? quantity of government petrol bought revenue A decreases decreases B decreases increases C increases decreases D increases increases

1 marks

Answer: B

This question in 0455/13 May/June 2022

Q198 · What is included in a government budget calculation? 0455/11 Oct/Nov 2022

16 What is included in a government budget calculation? A export revenue B external costs C indirect tax revenue D opportunity cost

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2022

Q199 · Which pair is included in a government’s budget? 0455/12 Oct/Nov 2022

16 Which pair is included in a government’s budget? A consumption and factor income B exports and imports C investments and savings D public expenditure and tax revenue

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2022

Q200 · The table shows the rate of income tax paid at different income levels 0455/12 Oct/Nov 2022

17 The table shows the rate of income tax paid at different income levels. level of income rate of income tax $ % 30 000 20 40 000 30 50 000 40 What describes this type of tax? A indirect B progressive C proportional D regressive

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2022

Q201 · A government decides to boost the economy through the use of a budget deficit 0455/13 Oct/Nov 2022

16 A government decides to boost the economy through the use of a budget deficit. Which target should it adopt to achieve this aim? A Direct taxation should exceed indirect taxation. B Export earnings should exceed import expenditure. C Government savings should exceed government investment. D Government spending should exceed government revenue.

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2022

Q202 · A government decides to use a fiscal policy measure 0455/13 Oct/Nov 2022

17 A government decides to use a fiscal policy measure. What is an example of this? A increasing the exchange rate B reducing the power of trade unions C reducing the rate of corporation tax D setting a low interest rate

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2022

Q203 · What is the most likely consequence of increased unemployment? 0455/13 Oct/Nov 2022

21 What is the most likely consequence of increased unemployment? A higher output B higher government budget deficit C higher self-esteem D higher inflation

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2022

Q204 · Which combination of government actions is most likely to raise the living standards of… 0455/13 Oct/Nov 2022

25 Which combination of government actions is most likely to raise the living standards of lower income groups in an economy? spending on personal tax-free indirect tax healthcare allowance A increase increase decrease B increase decrease increase C reduce increase decrease D reduce increase increase

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2022

Q205 · In the past, governments have adopted policies to try to end a recession in their country… 0455/12 Feb/March 2023

20 In the past, governments have adopted policies to try to end a recession in their country and increase economic growth. Which combination of policies is most likely to achieve this? A lower taxes and decrease government spending B lower taxes and increase government spending C raise taxes and decrease government spending D raise taxes and increase government spending

1 marks

Answer: B

This question in 0455/12 Feb/March 2023

Q206 · The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries 0455/12 Feb/March 2023

21 The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries. From this information, which country had the highest percentage of direct taxation as a percentage of GDP? tax on tax on goods tax on income tax % business and services dividends % profits % % A 12 14 2 5 B 14 15 2 14 C 17 13 5 10 D 18 10 1 10

1 marks

Answer: C

This question in 0455/12 Feb/March 2023

Q207 · A government has introduced a tax on a necessity 0455/11 May/June 2023

21 A government has introduced a tax on a necessity. Producers have passed on a large proportion of this tax to consumers in the form of higher prices. Which row is correct? price elasticity type of tax of demand A direct price elastic B direct price inelastic C indirect price elastic D indirect price inelastic

1 marks

Answer: D

This question in 0455/11 May/June 2023

Q208 · A government decides to leave direct taxes unchanged but to increase indirect taxes 0455/12 May/June 2023

17 A government decides to leave direct taxes unchanged but to increase indirect taxes. What is this policy intended to achieve? A to increase the value of the exchange rate B to redistribute income from higher to lower income groups C to reduce a budget deficit D to reduce the rate of inflation

1 marks

Answer: C

This question in 0455/12 May/June 2023

Q209 · A government wishes to stimulate economic recovery 0455/13 May/June 2023

19 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

1 marks

Answer: B

This question in 0455/13 May/June 2023

Q210 · The government of country Z announces a forecast budget deficit of $234 billion, as part… 0455/11 Oct/Nov 2023

17 The government of country Z announces a forecast budget deficit of $234 billion, as part of its fiscal policy. What is the effect of this forecast budget deficit likely to be? A a decrease in economic growth B a decrease in inflation C an increase in employment D an increase in unemployment

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2023

Q211 · Which change to fiscal policy is most likely to reduce cyclical unemployment in an… 0455/12 Oct/Nov 2023

22 Which change to fiscal policy is most likely to reduce cyclical unemployment in an economy? A increasing direct taxation B increasing the budget deficit C increasing the budget surplus D increasing the money supply

1 marks

Answer: B

This question in 0455/12 Oct/Nov 2023

Q212 · A government increases its revenue by higher direct taxation of both personal incomes and… 0455/13 Oct/Nov 2023

17 A government increases its revenue by higher direct taxation of both personal incomes and company profits. What is most likely to be the reason for this increase? A to control spending on specific consumer goods B to encourage business investment C to provide public and merit goods D to reduce pollution from industrial production

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2023

Q213 · Income tax in a country gives all individuals an initial tax-free income allowance 0455/13 Oct/Nov 2023

18 Income tax in a country gives all individuals an initial tax-free income allowance. Any income above this allowance is taxed at increasing rates as the incomes of individuals rise. Which change to this income tax will be regressive? A decreasing the lowest rate of tax B decreasing the tax-free income allowance C increasing the tax-free income allowance D increasing the top rate of tax

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2023

Q214 · An economy is experiencing a period of deflation with lower output and rising unemployment 0455/12 Feb/March 2024

17 An economy is experiencing a period of deflation with lower output and rising unemployment. Which policy measure would the government be most likely to use to correct this? A improve education and training B increase interest rates C reduce income tax D reduce unemployment benefits

1 marks

Answer: C

This question in 0455/12 Feb/March 2024

Q215 · A government wishes to prevent deflation 0455/12 May/June 2024

18 A government wishes to prevent deflation. Which combination of policies would be the most effective in achieving this aim? government interest rate spending A increase increase B increase reduce C reduce increase D reduce reduce

1 marks

Answer: C

This question in 0455/12 May/June 2024

Q216 · What is the most likely impact of lower direct taxes on demand and on supply? 0455/13 May/June 2024

20 What is the most likely impact of lower direct taxes on demand and on supply? demand supply A decrease decrease B decrease increase C increase increase D increase decrease

1 marks

Answer: C

This question in 0455/13 May/June 2024

Q217 · A government intends to subsidise bus fares and increase taxes on private motoring 0455/11 Oct/Nov 2024

9 A government intends to subsidise bus fares and increase taxes on private motoring. How would this affect the private cost of transport? for bus for motorists passengers A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 0455/11 Oct/Nov 2024

Q218 · The table shows a forecast for a government budget for year 1 and for year 2 0455/11 Oct/Nov 2024

18 The table shows a forecast for a government budget for year 1 and for year 2. year 1 $bn year 2 $bn revenue 50 55 spending 60 60 What does the forecast government budget for year 2 show? A The budget deficit decreased when compared with year 1. B The budget deficit increased when compared with year 1. C The budget surplus decreased when compared with year 1. D The budget surplus increased when compared with year 1.

1 marks

Answer: A

This question in 0455/11 Oct/Nov 2024

Q219 · The table shows the rates of unemployment and real GDP growth for an economy in year 1… 0455/11 Oct/Nov 2024

21 The table shows the rates of unemployment and real GDP growth for an economy in year 1 and year 2. year 1 year 2 rate of 3 7 unemployment (%) rate of real GDP 3 −1 growth (%) Which combination of policy measures would be most effective in returning the economy to the year 1 level of activity? A a decrease in direct taxes and an increase in the rate of interest B a decrease in government expenditure and an increase in the rate of interest C an increase in direct taxes and a decrease in the rate of interest D an increase in government expenditure and a decrease in the rate of interest

1 marks

Answer: D

This question in 0455/11 Oct/Nov 2024

Q220 · Which macroeconomic policy is most likely to achieve economic growth and price stability… 0455/12 Oct/Nov 2024

19 Which macroeconomic policy is most likely to achieve economic growth and price stability at the same time? A fiscal policy B import barriers C monetary policy D supply-side policy

1 marks

Answer: D

This question in 0455/12 Oct/Nov 2024

Q221 · The table shows government expenditure and revenue in selected years 0455/12 Oct/Nov 2024

22 The table shows government expenditure and revenue in selected years. government tax year expenditure revenue $bn $bn 1 500 500 2 600 400 3 700 300 What might explain the changes in the government’s budget over the period? A a fall in the dependency ratio B a fall in the exchange rate C an increase in cyclical unemployment D an increase in real GDP

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2024

Q222 · The table shows changes in economic policies for four countries, A, B, C and D 0455/12 Oct/Nov 2024

23 The table shows changes in economic policies for four countries, A, B, C and D. Which country is most likely to be following a policy of preventing deflation? government money supply taxation spending A decreasing decreasing decreasing B decreasing decreasing increasing C increasing increasing decreasing D increasing increasing increasing

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2024

Q223 · The table shows earnings and total income tax paid per year 0455/13 Oct/Nov 2024

18 The table shows earnings and total income tax paid per year. earnings $ total income tax paid $ 5000 1000 8000 2000 9000 3000 Which type of tax system does this illustrate? A indirect B progressive C proportional D regressive

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2024

Q224 · A government increases the rate of progressive income tax and its spending on hospitals 0455/13 Oct/Nov 2024

24 A government increases the rate of progressive income tax and its spending on hospitals. What is likely to happen to the distribution of income and to living standards? distribution of income living standards A becomes less even fall B becomes less even rise C becomes more even fall D becomes more even rise

1 marks

Answer: D

This question in 0455/13 Oct/Nov 2024

Q225 · What is the definition of a government budget? 0455/12 Feb/March 2025

17 What is the definition of a government budget? A a forecast of government spending and revenue for the following financial year B an account of government taxation revenues for the current financial year C an estimate of government capital spending for the current financial year D an explanation of government spending for the following financial year

1 marks

Answer: A

This question in 0455/12 Feb/March 2025

Q226 · A government decides to increase defence expenditure and reduce direct taxes 0455/12 Feb/March 2025

18 A government decides to increase defence expenditure and reduce direct taxes. Which type of policy is this? A exchange rate policy B fiscal policy C monetary policy D trade protection policy

1 marks

Answer: B

This question in 0455/12 Feb/March 2025

Q227 · What is a principle of taxation? 0455/11 May/June 2025

18 What is a principle of taxation? A equality between social cost and social benefit B fairness between taxpayers C profit maximisation by firms D tax revenue maximisation

1 marks

Answer: B

This question in 0455/11 May/June 2025

Q228 · The diagram shows the percentage of income taken by a tax at different levels of income 0455/12 May/June 2025

18 The diagram shows the percentage of income taken by a tax at different levels of income. % paid in tax tax O income Which term is used to describe the tax? A indirect B progressive C proportional D regressive

1 marks

Answer: D

This question in 0455/12 May/June 2025

Q229 · What is not a likely consequence of a rise in the budget deficit in a year? 0455/12 May/June 2025

19 What is not a likely consequence of a rise in the budget deficit in a year? A a rise in government borrowing B a rise in the level of exports C a rise in the national debt D a rise in the rate of inflation

1 marks

Answer: B

This question in 0455/12 May/June 2025

Q230 · A country's unemployment rate increased from 3.6% to 4.2% in one year 0455/13 May/June 2025

18 A country's unemployment rate increased from 3.6% to 4.2% in one year. What might be the consequences for tax revenues and welfare payments? tax revenues welfare payments A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 0455/13 May/June 2025

Q231 · In a country, some highly-paid workers reduce their working hours because of very high… 0455/13 May/June 2025

19 In a country, some highly-paid workers reduce their working hours because of very high income tax rates at higher levels of income. What is a disadvantage of this income taxation? A It creates uncertainty for workers. B It does not maximise tax revenue. C It is inequitable for lower-income earners. D It is regressive in the distribution of income.

1 marks

Answer: B

This question in 0455/13 May/June 2025

Q232 · A government's spending currently equals its revenue 0455/11 Oct/Nov 2025

18 A government's spending currently equals its revenue. The government decides to decrease its spending. What is the most likely effect of this in the short run? A a budget deficit B a budget surplus C an increase in output D an increase in tax revenue

1 marks

Answer: B

This question in 0455/11 Oct/Nov 2025

Q233 · A government collects the following revenue in a year 0455/12 Oct/Nov 2025

18 A government collects the following revenue in a year. $m taxes on goods 30 taxes on income 500 taxes on services 20 customs and excise duties 50 What is the amount of indirect tax revenue? A $30m B $70m C $100m D $500m

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2025

Q234 · Which policy measures would be classified as fiscal policy? 0455/12 Oct/Nov 2025

19 Which policy measures would be classified as fiscal policy? A changes in interest rates and money supply B changes in labour market policies to encourage more training C changes in tax rates and government spending D changes in the exchange rate

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2025

Q235 · In many high-income economies, increasing income inequality has led to greater levels of… 0455/12 Oct/Nov 2025

25 In many high-income economies, increasing income inequality has led to greater levels of poverty. Which combination of policies would aim to reduce income inequality? fiscal policy supply-side policy A decrease corporation tax create more competition B increase income tax reduce the power of trade unions C increase inheritance tax increase the national minimum wage D increase sales tax privatise more public sector firms

1 marks

Answer: C

This question in 0455/12 Oct/Nov 2025

Q236 · What is not likely to be included in a government budget? 0455/13 Oct/Nov 2025

19 What is not likely to be included in a government budget? A anticipated tax revenue B changes in exchange rates C forecast government borrowing D proposed government spending

1 marks

Answer: B

This question in 0455/13 Oct/Nov 2025

Q237 · Which combination of policy measures is most likely to increase total demand in an… 0455/13 Oct/Nov 2025

20 Which combination of policy measures is most likely to increase total demand in an economy? money supply interest rate exchange rate A decrease decrease revaluation B decrease increase devaluation C increase decrease devaluation D increase increase revaluation

1 marks

Answer: C

This question in 0455/13 Oct/Nov 2025