3.5 Fiscal Policy Revision

What is the name of the most significant income tax band, charged on income just above the personal allowance?

• Basic rate

• Main rate

• Higher rate

• Standard rate

What type of taxation is used to try and reduce the level of inequality?

• Direct

• Indirect

• Regressive

• Progressive

Which of these is an example of a direct tax?

• VAT

• Income tax

• Air passenger duty

• Climate change levy

A government decides to impose a tax on a product to reduce consumption. The effectiveness of this will be reduced if a characteristic of the product is

• elastic supply

• large opportunity costs

• low average costs

• price inelastic demand

A government has decided to increase economic growth by budgeting for an excess of expenditure over revenue. One problem that this might cause could be

• balance of payments deficit

• fall in total demand in the economy

• budget deficit

• rise in unemployment

Which of the following pairs of policy changes is the most appropriate response to reduce a large budget deficit?

• Increased taxation and higher government spending

• Increased taxation and lower government spending

• Reduced taxation and higher government spending

• Reduced taxation and lower government spending

Which pair of policies is most likely to lead to a reduction in income inequality?            

• Less progressive income taxes and higher unemployment benefits  

• Less progressive income taxes and lower unemployment benefits

• More progressive income taxes and higher unemployment benefits

• More progressive income taxes and lower unemployment benefits

Which of the following correctly identifies the overall effects that a significant increase in government expenditure is most likely to have on economic growth and unemployment?

• A

• B

• C

• D

A budget surplus is best described as which of the following?

• Where government revenue is greater than government expenditure

• Where government revenue is less than government expenditure

• Where the value of exports is less than the value of imports

• Where the value of imports is less than the value of exports

Which one of the following is most likely to reduce unemployment?

• increased government expenditure

• increased imports

• increased interest rates

• increased taxes