1
1 mark
What is a common role of local government?
Monitoring international trade
National defense and security
Provision of public goods like refuse collection
Monetary policy
Was this exam question helpful?
Syllabus Edition
First teaching 2025
First exams 2027
Government Macroeconomic Intervention (Cambridge (CIE) O Level Economics): Exam Questions
Exam code: 2281
2 hours53 questions
2
1 mark
What are the three levels of government intervention in a mixed economy?
A | Local | Supply Side | International |
B | Local | National | Monetary |
C | International | Exchange rates | Local |
D | International | Local | National |
Was this exam question helpful?
3
1 mark
What is the aim of protectionism?
To promote free trade
To encourage good international relations
To restrict foreign competition
To reduce government intervention in trade
Was this exam question helpful?
4
1 mark
What is the main purpose of fiscal policy?
Regulating the money supply and interest rates
Influencing economic activity through government spending and taxation
Managing the exchange rate of the national currency
Allocating resources to local projects
Was this exam question helpful?
5
1 mark
Which of the following is not an example of a macroeconomic aim from a national government?
Economic growth
Low and stable inflation rate
Better international trade with other countries
Low unemployment
Was this exam question helpful?
6
1 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
Was this exam question helpful?
7
1 mark
What is an aim of government policy?
income tax
interest rates
stable prices
unemployment
Was this exam question helpful?
8
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
Was this exam question helpful?
9
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
Was this exam question helpful?
10
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
Was this exam question helpful?
1
1 mark
What is most likely to be the responsibility of a central government?
the provision of immigration officials at an airport
the provision of security cameras in a shopping centre
the provision of security staff at a bank
the provision of ticket inspectors on a train
Was this exam question helpful?
2
1 mark
In a city, what is most unlikely to be provided by the private market system?
a museum
a school
a sports field
street lights
Was this exam question helpful?
3
1 mark
What is a characteristic of a mixed economy?
Government has complete control over all economic activities
Private ownership and government intervention exist together
All production is carried out by foreign companies
Government sets prices for all goods and services
Was this exam question helpful?
4
1 mark
Which term below does not describe a local government branch?
State
National
Council
Federal
Was this exam question helpful?
5
1 mark
What is the role of local government in promoting economic development?
Setting national tax rates
Implementing international trade agreements
Providing incentives for local businesses
Managing the national budget
Was this exam question helpful?
6
1 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
Was this exam question helpful?
7
1 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
Was this exam question helpful?
8
1 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.
Was this exam question helpful?
9
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 |
Was this exam question helpful?
10
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
Was this exam question helpful?
11
1 mark
Which of the following is a main aim of government macroeconomic policy?
higher company profits
stable prices
larger trade unions
unlimited economic growth
Was this exam question helpful?
1
1 mark
What is an exchange rate intervention by the government?
A government policy that promotes trade barriers
A decision to adopt a fixed exchange rate system
A deliberate action to influence the value of the national currency
A measure to stop all foreign exchange transactions
Was this exam question helpful?
2
1 mark
Why does the government provide public goods and services in a mixed economy?
To stop private ownership of key industries
To ensure that all goods are provided for free
To solve market failures and provide essential services
To discourage private individuals from participating in the economy
Was this exam question helpful?
3
1 mark
What is the main source of government revenue in a mixed economy?
Private investments in all industries
Subsidies provided to domestic businesses
Taxes collected from individuals and businesses
Export earnings from international trade
Was this exam question helpful?
4
1 mark
What is a common method of protecting domestic firms?
Removing all trade barriers and tariffs
Encouraging foreign investment without any restrictions
Providing financial assistance to foreign competitors
Imposing tariffs and quotas on imported goods
Was this exam question helpful?
5
1 mark
What is the purpose of government regulation in a mixed economy?
To eliminate all competition
To ensure equal distribution of income
To protect consumers, workers, and maintain fair competition
To control all aspects of production and pricing
Was this exam question helpful?
6
1 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.
Was this exam question helpful?
7
1 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 |
Was this exam question helpful?
8
1 mark
Which scenario below shows a current account surplus?
Imports > exports
Imports = Exports
Exports - Imports
Exports > imports
Was this exam question helpful?
9
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
Was this exam question helpful?
10
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
Was this exam question helpful?