Fiscal policy — Paper 1 · IGCSE Economics (9-1) 0987

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 0987/11 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 0987/11 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 0987/11 May/June 2020

19 The government redistributes income more evenly. What is most likely to increase? A the incentive to work B the level of savings C the need for welfare payments D the rate of inflation

1 marks

Answer: D

This question in 0987/11 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 0987/12 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 0987/12 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 0987/12 May/June 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 0987/12 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 0987/12 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 0987/12 Oct/Nov 2020

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 0987/11 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 0987/11 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 0987/12 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 0987/12 May/June 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 0987/12 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 0987/12 Oct/Nov 2021

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 0987/11 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 0987/12 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 0987/12 May/June 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 0987/12 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 0987/12 Oct/Nov 2022

30 Which policy measure is most likely to reduce the current account deficit of the balance of payments of an economy? A decrease the level of subsidies to domestic producers B increase infrastructure spending to increase domestic productivity C increase interest rates D remove import tariffs

1 marks

Answer: B

This question in 0987/11 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 0987/12 May/June 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 0987/12 Oct/Nov 2023

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 0987/12 May/June 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 0987/12 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 0987/12 Oct/Nov 2024

23 What is most likely to rise when the level of employment falls in a high-income economy? A consumer confidence B government expenditure on state benefits C government revenue from income tax D the rate of growth of real output

1 marks

Answer: B

This question in 0987/11 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 0987/12 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 0987/12 May/June 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 0987/12 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 0987/12 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 0987/12 Oct/Nov 2025