Government and the Macroeconomy Quiz

What is the main role of the public sector in the economy?

• Produce goods and services

• Maximize profits

• Increase unemployment benefits

• Reduce taxes

What is the purpose of income redistribution by the government?

• Boost inflation

• Encourage unemployment

• Reduce poverty

• Increase income inequality

What does a positive Balance of Payments (Bop) indicate?

• Unemployment

• Surplus

• Inflation

• Deficit

What is the impact of low unemployment on the economy?

• Reduced economic growth

• Decreased income tax revenue

• Higher standard of living

• Increased poverty levels

What is the effect of high inflation on the economy?

• Increased demand for local goods

• Lower business expansion

• Decreased purchase of foreign goods

• Better standard of living

What does Gross Domestic Product (GDP) measure?

• Total government spending

• Value of all goods and services produced

• Net exports

• Consumer spending

What is the main goal of fiscal policy?

• Increase unemployment

• Stabilize the economy

• Reduce government spending

• Encourage inflation

How does an increase in interest rates affect consumers?

• Boosts savings

• Decreases disposable income

• Promotes borrowing

• Encourages spending

What is the best measure of economic growth?

• Consumer Price Index

• Unemployment rate

• Nominal GDP

• Real GDP per capita

What is the consequence of high inflation?

• Stable economy

• Decreased purchasing power

• Increased investment and GDP

• Higher savings returns