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Fiscal policy

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  • Which of these types of government spending is an example of current expenditure?
    Flood defence schemes
    Universal credit
    New hospital equipment
    Construction of a new railway line
  • Which of the following is an instrument of fiscal policy?
    Interest rates
    Regulation
    Quantitative easing
    Income tax
  • Which of the following is an example of a fiscal policy?
    A change in the level of government spending
    A change in the rate of interest
    A change in the money supply
    A change in the exchange rate
  • There is a sharp rise in unemployment in the economy. What will be the likely impact if automatic stabilisers already exist in the economy?
    Aggregate demand will rise faster than it otherwise would
    Aggregate demand will fall by more than it otherwise would
    Aggregate supply will fall faster than it otherwise would
    Aggregate demand will fall by less than it otherwise would
  • A smartphone manufacturer sees the demand for its phone rise in response to a decision to reduce its price below that of a competitor. How can this rise in demand be shown on a diagram?
    A contraction along the demand curve
    An extension along the demand curve
    The demand curve shifting to the left
    The demand curve shifting to the right
  • Which of the following is an example of current expenditure by government?
    Salaries of National Health Service employees.
    Improvements to motorways to increase capacity.
    Investment in additional offshore wind farms.
    Construction of aircraft carriers.
  • Between 1990 and 1992, UK citizens were charged a Community Charge commonly known as the poll tax – a single flat-rate per capita tax on every adult at a rate set by the local authority. What type of tax was this?
    Proportional
    Indirect
    Regressive
    Progressive
  • What is the marginal tax rate if an individual’s annual income increases from £30 000 to £35 000?
    50%
    30%
    10%
    13%
  • If a country’s tax receipts are $520bn and government expenditure is $540bn, which of the following best describes the state of the macroeconomy?
    Budget deficit
    Budget surplus
    Current account surplus
    Current account deficit
  • Which of these is a tool of monetary policy?
    Interest rates
    Income tax
    Subsidies to firms
    Welfare payments
  • Which of the following is a direct tax in the UK?
    Value added tax
    Excise duty
    Income tax
    Council tax
  • What can the government do to finance a budget deficit?
    Reduce the money supply
    Devalue the exchange rate
    Increase export subsidies
    Issue government bonds
  • Which of these would be the most effective in reducing expenditure on imports?
    Increased indirect taxation
    Reduced research and development subsidies for UK firms
    Reduced interest rates
    Increased government expenditure on welfare payments
  • UK government spending on the new high-speed railway line from London to Birmingham is likely, in the short run, to:
    increase the budget deficit
    increase the current account deficit
    reduce the current account deficit
    reduce the budget deficit
  • The table below outlines the income tax rates in the UK in 2016–17. What is the average tax rate of an individual earning £46 500?
    16.8%
    21.5%
    20%
    40%
  • Which of the following is the most likely explanation of what is shown in the diagram above?
    An improvement in the availability and affordability of chil
    A reduction in the interest rate
    Research & development subsidies
    An increase in the basic rate of income tax
  • What does the Laffer Curve show?
    Tax revenue will remain constant as the tax rate increases.
    There is a positive correlation between the tax rate and tax
    The correlation between the tax rate and tax revenue changes
    There is a negative correlation between the tax rate and tax
  • If government spending increases significantly during a recession, it may cause a:
    structural budget deficit
    current account surplus
    cyclical budget deficit
    capital account surplus
  • Which of the following statements about the country’s direct tax system is true?
    The system is progressive throughout the income range
    The system is regressive from between €20 000 and €30 000
    The system is proportional throughout the income range
    The system is proportional from €10 000 to €20 000 only
  • What is an example of an automatic stabiliser in response to a period of negative economic growth?
    An increase in expenditure on education and training
    An in increase in the income tax-free personal allowance
    An increase in expenditure on unemployment benefits
    A decrease in the corporation tax rate
  • Current: Tiered system of seven tax rates, the lowest being a 10% rate on taxable income between $0 - $9,275, the highest being a 39.6% rate on taxable income exceeding $415,000. Proposal: 10% on all taxable income. This proposal shows;
    Regressive to Proportional
    Progressive to Regressive
    Regressive to Progressive
    Progressive to Proportional
  • What is the change in the average tax rate for an individual if their annual income increases from £25 000 to £30 000?
    20%
    2%
    10%
    8%
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