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IGCSEEconomicsCambridge (CIE)Exam Questions4. Government & the Macroeconomy4.2 The Macroeconomic Aims of Government

The Macroeconomic Aims of Government (Cambridge (CIE) IGCSE Economics): Exam Questions

Exam code: 0455 & 0987

59 mins26 questions

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4.2 The Macroeconomic Aims of Government

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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

Choose your answer

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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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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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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5
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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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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

    Choose your answer

    5
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    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

    Choose your answer

    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.

    Choose your answer

    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

      Choose your answer

      3
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      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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      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

      Choose your answer

      5
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      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

      Choose your answer