Pearson Edexcel A Level · Economics A (9EC0)

4.5.3-4.5.4 Public sector finances and macroeconomic policies in a global context: Practice Questions

5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on 4.5.3-4.5.4 Public sector finances and macroeconomic policies in a global context.

8 questions19 marksFree, no account

Question 1

1 mark

In the context of public sector finances, a structural deficit is defined as the part of the fiscal deficit that:

Question 2

1 mark

Which of the following factors is most likely to lead to an increase in the size of a country's cyclical deficit?

Question 3

1 mark

A government observes that its fiscal deficit increases during an economic recession without any change in tax rates or discretionary spending programs. This is most likely due to the operation of:

Question 4

1 mark

If a government aims to reduce its national debt as a percentage of GDP, which combination of factors would be most effective?

Question 5

1 mark

Which of the following best describes the distinction between the fiscal deficit and the national debt?

Question 6

4 marks

Distinguish between a structural deficit and a cyclical deficit, and identify which one is more likely to be eliminated without direct government intervention as the output gap closes.

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Question 7

6 marks

Evaluate why a country experiencing a high structural deficit despite a narrowing cyclical deficit might find it increasingly difficult to attract Foreign Direct Investment (FDI) if it relies solely on discretionary fiscal policy to manage its public sector finances.

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Question 8

4 marks

Using the concept of automatic stabilisers, explain how a government's fiscal deficit is likely to change during a period of significant negative economic growth.

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