Practise comparing fiscal, monetary, supply-side, exchange-rate and trade policies across inflation, jobs, growth and external balance while evaluating conflicts and government…
An economy has a sudden increase in inflation caused by a large rise in energy prices. It also enters a recession with rising unemployment.
A decrease in which policy variable is most likely to reduce the impact of the recession without increasing the price level further?
direct taxation
government spending
indirect taxation
interest rate
C
Increased borrowing by the government results in higher interest charges and this leads to less private investment expenditure.
Of what is this an example?
an automatic stabiliser
crowding out
the accelerator
the substitution effect
B
A government wishes to increase economic efficiency in the country. It raises the rate of income tax which leads to the emigration of high-earning skilled workers that the country needs.
How would this outcome be described?
government
failure
market failure
negative
externality
no
no
yes
no
yes
no
yes
yes
no
yes
no
no
D