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IGCSEEconomicsCambridge (CIE)Exam Questions4. Government & the Macroeconomy4.3 Fiscal Policy

Fiscal Policy (Cambridge (CIE) IGCSE Economics): Exam Questions

Exam code: 0455 & 0987

2 hours40 questions

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4.3 Fiscal Policy

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11 mark

The table shows a government’s receipts from taxation.

 

$m

tax on company profits

income tax

import duties

sales tax

100

600

30

250

What is the total amount of revenue raised by direct taxes?

  • $280m

  • $700m

  • $730m

  • $950m

Choose your answer

21 mark

What is an example of an expansionary fiscal policy?

  • decreased budget deficit

  • higher interest rates

  • increased money supply

  • reduced tax rates

Choose your answer

31 mark

Which measure would indicate that an expansionary fiscal policy is being used by the government?

  • cuts in government spending

  • higher interest rates

  • lower interest rates

  • lower taxes

Choose your answer

41 mark

A government decides to increase tax revenues from consumer expenditure.

Which tax will it increase?

  • capital gains tax

  • death duties

  • profits tax

  • value added tax

Choose your answer

51 mark

Which form of taxation always takes an increasing percentage of the taxpayer’s income as it rises?

  • indirect

  • progressive

  • proportionate

  • regressive

Choose your answer

61 mark

What is most likely to be an example of a progressive tax?

  • customs duties on imported goods

  • excise duties on cigarettes

  • income tax

  • sales tax

Choose your answer

11 mark

Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive when comparing high-income and low-income purchasers?

  • High-income purchasers pay a higher percentage of their income in tax.

  • High-income purchasers pay a lower percentage of their income in tax.

  • Low-income purchasers pay a lower percentage of their income in tax.

  • Low-income purchasers and high-income purchasers pay the same percentage of their income in tax.

Choose your answer

21 mark

Which policy would be most likely to reduce unemployment in the short run?

  • a programme of privatisation

  • a reduction in the standard rate of income tax

  • grants to firms to research new technology

  • removal of all restrictions on imports into the country

Choose your answer

31 mark

A government decreased the tax on all goods produced in its country.

What is the most likely consequence of this?

  • a decrease in exports

  • an increase in imports

  • an increase in production

  • a worsening of the balance of trade in goods

Choose your answer

41 mark

Due to a rise in the number of retired people, there has been increased demand for some government expenditure.

Which type of government expenditure is most likely to be directly affected?

  • defence

  • health services

  • re-training grants

  • street lighting

Choose your answer

51 mark

An economy is experiencing rising prices.

Which government policy will help reduce consumer expenditure?

  • introducing compulsory saving for income earners

  • investing more in building infrastructure

  • issuing more banknotes and coins

  • reducing indirect taxes

Choose your answer

61 mark

One aim of government policy is to redistribute income through taxation in order to reduce inequality.

Which policy will achieve this aim?

  • Impose a tax of $0.20 on every dollar earned.

  • Increase the tax-free allowances after which tax must be paid progressively.

  • Introduce a tax on all food.

  • Provide an incentive to earn by reducing taxes for the highest paid.

Choose your answer

71 mark

The standard rate for Value Added Tax (sales tax) is 20% in a country. Different consumers buying the same product have to pay the same amount of tax.

What kind of tax is this?

  • direct

  • progressive

  • proportional

  • regressive

Choose your answer

81 mark

What is a disadvantage of direct taxes?

  • They can be a disincentive to work.

  • They can be based on people’s ability to pay.

  • They can be a major source of tax revenue.

  • They can be progressive.

Choose your answer

91 mark

When is a government said to balance its budget?

  • when all goods and services are taxed equally

  • when economic growth is the same in all regions of the economy

  • when its total income equals its total expenditure

  • when total exports equal total imports

Choose your answer

11 mark

The table shows the tax that an individual would pay at different levels of disposable income.

disposable income ($)

10 000

20 000

30 000

40 000

tax ($)

0

2000

4000

6000

Which type of tax is shown in the table?

  • corporation tax

  • indirect tax

  • progressive tax

  • regressive tax

Choose your answer

21 mark

Which actions would be likely to increase government expenditure and reduce revenues from taxation?

 

government expenditure

tax revenues

A

improve health facilities for the elderly

encourage people to reduce their spending

B

increase the amount of the state pension

increase VAT (sales tax)

C

provide free bus transport for retired people

encourage people to work beyond retirement

D

raise the age of retirement

decrease bus fares

    Choose your answer

    31 mark

    The table shows tax paid at different income levels in an economy.

    income level ($)

    tax paid ($)

    5 000

    12 000

    20 000

    30 000

    500

    2400

    5000

    6000

    Which description of the tax system used is correct?

    • continually progressive

    • progressive then regressive

    • proportional

    • regressive then progressive

    Choose your answer

    41 mark

    The table shows the amount of tax paid as income rises in four countries, A–D.

    Which country has a progressive tax?

     

    amount of tax (US$) paid on income of:

    10 000

    20 000

    30 000

    40 000

    50 000

    A

    B

    C

    D

    2 000

    2 000

    4 000

    4 000

    4 000

    6 000

    4 500

    7 000

    6 000

    12 000

    5 000

    9 000

    8 000

    18 000

    5 500

    10 000

    10 000

    25 000

    6 000

    12 000

      Choose your answer

      51 mark

      The table shows the amount of tax to be paid at different weekly incomes.

      weekly income ($)

      100

      150

      200

      250

      weekly tax ($)

      20

      30

      36

      40

      Which statement describes the system of income tax as income rises over this range?

      • It is progressive throughout.

      • It is proportional then becomes progressive.

      • It is proportional then becomes regressive.

      • It is regressive throughout.

      Choose your answer