The Macroeconomic Aims of Government (Cambridge (CIE) IGCSE Economics)

Exam Questions

53 mins26 questions
11 mark

What is an example of a macroeconomic aim?

  • to create and maintain full employment

  • to improve efficiency in the manufacturing sector of the economy

  • to provide consumers with greater information when buying goods and services

  • to encourage greater occupational mobility of labour

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21 mark

What is an aim of government policy?

  • income tax

  • interest rates

  • stable prices

  • unemployment

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3
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1 mark

What does the term inflation mean?

  • A decrease in the general price level of goods and services

  • The steady state of prices without any changes over time

  • An increase in the general price level of goods and services

  • A sudden collapse of the financial market

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4
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1 mark

What is a positive impact of economic growth?

  •  Economic growth leads to higher unemployment rates

  • Economic growth reduces job opportunities

  • Economic growth creates new jobs and lowers unemployment

  • Economic growth has no effect on employment

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1 mark

What is absolute poverty?

  • Occurs when household income is a certain % below median incomes e.g. 65% below

  • A record of all the financial transactions that occur between it and the rest of the world

  • Someone who does not have a job & are actively seeking one

  • When household income is below a level that would allow the consumption of the basic necessities for life e.g. food, shelter

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11 mark

What are two aims that a government normally pursues when managing the performance of the whole economy?

  • to encourage an increase in production and to prevent high inflation

  • to ensure no one is unemployed and to reduce exports

  • to give everyone equal incomes and to increase government revenue

  • to protect the environment and to reduce interest rates

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21 mark

What is most likely to cause a more even distribution of income?

  • an increase in indirect taxation

  • an increase in inflation

  • an increase in managers’ salaries

  • an increase in progressive taxation

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31 mark

A government increases the rate of income tax in order to pay for extra transfer payments, including cash benefits to the poor.

What must occur as a result of this?

  • It changes the distribution of income.

  • It ensures the equality of incomes.

  • It leads to more people paying income taxes.

  • It reduces the level of unemployment.

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4
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1 mark

Policy decisions by governments often create a trade-off in the macroeconomic objectives.

Which of the following does not show a macroeconomic conflict?

A

Increasing economic growth

Higher inflation inflation

B

Increasing economic growth

Increased pollution

C

Low unemployment

Low inflation

D

Low unemployment

Increased imports

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    1 mark

    What is a trade-off between economic growth and environmental sustainability?

    • Economic growth doesn't impact environmental sustainability

    • Economic growth can harm the environment but improve social well-being

    • Economic growth has no impact on social well-being

    • Economic growth can always coexist with perfect environmental sustainability

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    11 mark

    A government lowers interest rates to encourage more borrowing and spending by households to increase economic growth.

    Why could this lead to a conflict with other government aims?

    • It could cause uncertainty and lead to lower demand.

    • It could encourage more savings and lead to higher unemployment.

    • It could lead to lower prices of consumer goods and result in deflation.

    • It could stimulate consumer demand and lead to inflation.

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    21 mark

    In which case is success for the government in achieving the first aim likely to cause problems in achieving the second?

     

    first aim

    second aim

    A

    B

    C

    D

    full employment

    high economic growth

    price stability

    stable balance of payments

    price stability

    full employment

    stable balance of payments

    more even distribution of income

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      3
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      1 mark

      Which scenario below shows a current account surplus?

      •  Imports > exports

      • Imports = Exports

      • Exports - Imports

      • Exports > imports

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      4
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      1 mark

      Which supply side policy response below would help to ease cost push inflation?

      • Increase in business taxes

      • Policies to open a market to more competition

      • Higher interest rates

      • Reduction in welfare payments

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      5
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      1 mark

      How can we best describe the relationship between unemployment and real GDP growth?

      • Unemployment tends to be inversely proportional to real GDP growth

      • Unemployment tends to have no correlation real GDP growth

      • Unemployment tends to be directly proportional to real GDP growth

      • Unemployment tends to be always higher than real GDP growth

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