Practise recognising macroeconomic objectives and matching policy choices to price stability, low unemployment and economic growth.
Sweden had a change in its Consumer Prices Index (CPI) of -0.6 %.
Which combination of policies might its government use to restore price stability?
increase interest rates and increase indirect taxes
increase interest rates and reduce government spending
reduce government spending and increase income tax
reduce interest rates and increase government spending
D
A government uses monetary policy and fiscal policy to solve a problem of deflation.
Which policy combination is likely to be the most successful?
monetary policy
fiscal policy
increasing interest rates
contractionary
increasing interest rates
expansionary
reducing interest rates
contractionary
reducing interest rates
expansionary
D
Country X is an open economy with a fixed exchange rate.
Which combination of fiscal and monetary policies would be most effective in reversing a deflation?
fiscal policy
monetary policy
lower direct taxes
devaluation
lower direct taxes
revaluation
lower indirect taxes
devaluation
lower indirect taxes
revaluation
A