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Question Bank - Economics

Government Policy: General

Q1. The government increases government spending to try to reduce unemployment. This is an example of

(Select one answer)

(a) * automatic stabilisers
(b) * monetary policy
(c) * laissez-faire.
(d) * fine tuning.

Source: Pearson logo

Q2. De-regulation is where the government

(Select one answer)

(a) * breaks up private sector monopolies
(b) * removes barriers to entry
(c) * removes barriers to entry and minimum product quality standards
(d) * sells public utilities to the private sector

Source: Pearson logo

Q3. Where a tax can be shifted the incidence depends on

(Select one answer)

(a) * elasticities of demand and supply
(b) * how many producers there are
(c) * who is legally obliged to pay the tax
(d) * whether there is perfect or imperfect information

Source: Pearson logo

Q4. Privatisation refers to

(Select one answer)

(a) * the sale of public companies to the public sector
(b) * the sale of private companies to the public sector
(c) * the sale of public companies to the private sector
(d) * none of the above

Source: McGraw Hill logo

Q5. The idea that government spending causes a reduction in private investment is called

(Select one answer)

(a) * fiscal drag.
(b) * crowding-out
(c) * investment blight
(d) * the Thatcher effect

Source: Pearson logo

Q6. Privatisation is the transfer of

(Select one answer)

(a) * government businesses to the private sector.
(b) * privately owned businesses to the government sector.
(c) * corporately owned businesses to individuals.
(d) * publicly held stock to private individuals.

Source: Pearson logo

Q7. If government spending is increased by £700 and taxes are increased by £700, the equilibrium level of income will

(Select one answer)

(a) * decrease by £700.
(b) * increase by £700.
(c) * not change.
(d) * increase by £1,400.

Source: Pearson logo

Q8. The amount by which government spending must be decreased to achieve a specified deficit target is dependent upon the value of

(Select one answer)

(a) * tariff levels on certain imported products.
(b) * foreign tariff levels on exports.
(c) * foreign portfolio investment.
(d) * the government expenditures multiplier value

Source: Pearson logo

Q9. Time lags which often erode effectiveness of monetary and fiscal policy measures represent

(Select one answer)

(a) * delays in the response of the economy to stabilisation policy.
(b) * the foreign response to price changes.
(c) * the change in export and import prices
(d) * the change in exchange rates.

Source: Pearson logo

Q10. Nationalisation refers to

(Select one answer)

(a) * the acquisition of public companies by the public sector
(b) * the acquisition of private companies by the public sector
(c) * the acquisition of public companies by the private sector
(d) * none of the above

Source: McGraw Hill logo

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