Role of the State in the Macroeconomy (Edexcel A Level Economics A)

Exam Questions

2 hours14 questions
1
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2 marks

The UK Government is planning to cut the rate of corporation tax on all pre-tax profits of companies to 17% by 2020.

If a company makes £500 000 pre-tax profit in 2020, calculate how much corporation tax it will pay. Assume that the government cuts the rate of corporation tax as planned.

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2
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2 marks

The UK Government is planning to cut the rate of corporation tax on all pre-tax profits of companies to 17% by 2020.

Explain one possible reason why the revenue from corporation tax could increase if the government cuts the rate of tax.

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3
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2 marks

The UK has experienced a budget deficit since 2001. The government aimed to reach a budget surplus by 2019, but in 2016 this target was abandoned.

(Source: adapted from https://www.gov.uk/government/news/autumn- statement-2016-some-of-the-things-weve-announced)

Explain one likely reason why the 2019 budget surplus target was abandoned.

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4
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2 marks

The UK has experienced a budget deficit since 2001. The government aimed to reach a budget surplus by 2019, but in 2016 this target was abandoned.

(Source: adapted from https://www.gov.uk/government/news/autumn- statement-2016-some-of-the-things-weve-announced)

Explain the likely impact of abandoning the budget surplus target on the UK national debt.

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5
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1 mark

The UK has experienced a budget deficit since 2001. The government aimed to reach a budget surplus by 2019, but in 2016 this target was abandoned.

(Source: adapted from https://www.gov.uk/government/news/autumn- statement-2016-some-of-the-things-weve-announced)

If a government takes decisions to target a budget surplus, this is an example of:

  • contractionary monetary policy

  • discretionary fiscal policy

  • expansionary fiscal policy

  • expansionary monetary policy

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6
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1 mark

Which of the following best describes capital expenditure in government budgets?

  • Money spent on daily operational costs

  • Funds allocated for long-term investments

  • Payments made to individuals or businesses

  • Income generated through taxes

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7
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1 mark

If a government allocates funds for building a new school, in which category of expenditure would this be classified?

  • Capital expenditure

  • Current expenditure

  • Transfer payments

  • Revenue generation

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1
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10 marks

Assess the view that ‘some level of inequality is desirable to maintain an appropriate incentive structure in the economy’ (Extract B, lines 19 and 20) (10 marks)

Read Extract

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2
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8 marks

Examine two reasons why the Turkish government may want to avoid a significant fall in the exchange rate of the Turkish lira.

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3
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8 marks

With reference to Figures 4 and 5 and your own knowledge, examine the relationship between the national debt as a proportion of GDP and the fiscal deficit.  

Figure 4: UK national debt as a percentage of GDP

9ec0-03-june-2017-q2-fig-4

Figure 5: UK fiscal deficit, public sector net borrowing (PSNB)

9ec0-03-june-2017-q2-fig-5

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1
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25 marks

Japan’s budget deficit for 2017/18 is expected to be 4.6% of GDP. Its national debt is forecast to increase to above 250% of GDP by 2019.

Evaluate the impact of a large fiscal deficit and national debt on a country’s economy (25)

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2
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12 marks

Read Extract

With reference to Extract A, discuss two macroeconomic policies, apart from protectionism, that a government could use to reduce the negative effects of globalisation (12)

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3
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25 marks

Figure 4: UK national debt as a percentage of GDP

9ec0-03-june-2017-q2-fig-4

Figure 5: UK fiscal deficit, public sector net borrowing (PSNB)

9ec0-03-june-2017-q2-fig-5

With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic effects of a government policy of cutting public expenditure rather than raising taxes as a means of reducing a fiscal deficit.

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4
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25 marks

Refer Extract

With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic effects of policies that could be used to stimulate economic growth and development in Chile.

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