Macroeconomic objectives and policies: Practice Questions

• a.Free market supply-side policy
• b.Deflationary monetary policy
• c.Interventionist supply-side policy
• d.Reflationary fiscal policy

• a.Increased productivity reduces the price of exports, improving the trade balance
• b.Growth leads to higher tax revenues, which causes a budget deficit
• c.Lower unemployment leads to a decrease in the rate of inflation
• d.Higher consumer incomes during growth lead to an increased demand for imported goods

• a.The central bank increases the base interest rate to encourage saving and reduce inflation
• b.The central bank sells government bonds to commercial banks to reduce the money supply
• c.The central bank purchases financial assets from the private sector to increase the money supply and lower interest rates
• d.The government reduces its budget deficit by cutting public expenditure on healthcare and education

• a.Reducing total government expenditure
• b.Increasing the rate of corporation tax
• c.Decreasing the legal minimum wage
• d.Increasing the base interest rate

• a.A reduction in the top marginal rate of personal income tax
• b.The privatisation of state-owned electricity and water companies
• c.The deregulation of the domestic labour market to reduce hiring costs
• d.Increased government spending on vocational education and skills training

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

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