Government income and expenditure: Practice Questions

• a.

  The budget moves toward a deficit and aggregate demand increases.

• b.

  The budget moves toward a surplus and aggregate demand decreases.

• c.

  The budget remains balanced as tax revenues will automatically rise to match the spending.

• d.

  The budget moves toward a deficit and aggregate demand decreases.

• a.

  Capital Gains Tax on the sale of assets

• b.

  Corporation tax on company profits

• c.

  Excise duties on tobacco and alcohol

• d.

  National Insurance contributions

• a.

  A tax applied to the sale of specific goods, such as tobacco or alcohol, to discourage consumption.

• b.

  A tax that takes a larger percentage of income from low-income earners than from high-income earners.

• c.

  A tax where the percentage of income paid in tax rises as the individual's income increases, such as Income Tax.

• d.

  A tax where everyone pays the same fixed amount regardless of their income level, such as VAT.

• a.

  Because the government uses the revenue to fund services that only benefit the wealthy.

• b.

  Because the tax rate increases as the value of the good being purchased increases.

• c.

  Because only those with high incomes are required to pay VAT on luxury items.

• d.

  Because lower-income households spend a larger proportion of their total income on taxed goods compared to higher-income households.

• a.

  The wages paid to teachers in state-funded schools.

• b.

  The payment of state pensions and unemployment benefits.

• c.

  The purchase of new equipment for NHS hospitals.

• d.

  Investment in the construction of a new high-speed rail network.

Write your answer out first, then check it against the worked solution.