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A condition in which no change is possible that will make some members of society better off without making some other members of society worse off is
A) partial equilibrium.
B) general equilibrium
C) Pareto optimality
D) market failure.
Pareto optimality is the condition in which
A) no change is possible that will make some members of society better off without making some other members of society worse off.
B) it is possible to make one person better off without making someone else worse off.
C) the distribution of income is equal.
D) firms are forced to internalise the effects of all externalities.
Which of the following would be classified as an external cost?
A) A private firm will not provide national defence since it is impossible to confine the benefits to only those individuals who have paid for it.
B) As more firms began hiring computer programmers, the salaries of computer programmers increased and therefore the firm's cost of production increased.
C) You are not able to study at night because there is so much noise coming from the room next to yours.
D) When you purchase a medicine you are not made fully aware of all the possible side effects that may result from taking the drug.
Your next-door neighbour has a beautiful rose garden. However, you are allergic to roses and cannot use your garden because of the rose pollen that drifts into it. In this case, the rose garden is an example of
A) a public good.
B) a good that provides an external benefit.
C) a good that imposes an external cost.
D) a Pareto good.
Which of the following would be an example of an external benefit?
A) A firm has just obtained permission to open a landfill site on property that is adjacent to your home.
B) More people start to ride the bus and as a result air pollution is reduced.
C) Firms are able to reduce their costs of production by using a more efficient technology.
D) The government spends a million pounds on improving national parks.
Which of the following is NOT a possible source of market failure as economists use the term?
A) externalities.
B) public goods.
C) involuntary unemployment.
D) firms that are price-takers in the output market.
Because public goods are characterised by being collectively consumed,
A) they are very expensive, thus the private sector cannot provide them.
B) they are illegal.
C) the government cannot produce them.
D) the private sector may not provide them because they cannot exclude those who do not pay.
If it is very difficult to exclude people from consuming its benefits, a good is
A) a free good
B) a public good.
C) a Pareto good.
D) a private good.
The difficulty of getting people to pay for public goods other than by taxation is called
A) the free-rider problem
B) Arrow's impossibility theorem.
C) the Coase theorem.
D) the fallacy of composition.
A Quality Adjusted Life Year (QALY) shows
A) How expensive a medical treatment costs
B) How long a patient is expected to survive
C) The length of life weighted by a valuation of their health related quality of life
D) The pain and suffering from a medical condition
When people take excessive risks with their health because they are covered by insurance, this is called
A) Adverse Selection
B) Supplier Induced Demand
C) Monopoly
D) Moral Hazard
When health insurance premiums are driven up by high risk customers taking out policies, this is called
A) Adverse Selection
B) Supplier Induced Demand
C) Monopoly
D) Moral Hazard
Which two of the following might explain the progressive increase in share of ‘health care services’ in UK output and employment?
A) An ageing population in the UK
B) The shift from branded to generic drugs in health care treatments
C) Unit price elasticity of demand for health care services
D) Low income elasticity of demand for health care services in an expanding economy
E) High income elasticity of demand for health care services in an expanding economy
An equitable distribution of income means that
A) there is a long-run equilibrium distribution.
B) there is a fair distribution.
C) there is an equal distribution.
D) there is an efficient distribution.
Which of these countries had the highest level of income inequality in 2013 shown by the Gini coefficient?
A) Estonia
B) Poland
C) UK
D) Norway
In 2015 the poorest 50% of UK households owned roughly ________. % of its wealth
A) 25%
B) 20%
C) 15%
D) 9%
In 2015 the richest 10% of the UK households owned roughly ________% of its wealth.
A) 15
B) 25
C) 35
D) 45
If income were distributed equally, the Lorenz curve would be
A) a 45-degree line between 0 and 100%.
B) a line lying directly on the vertical axis at 0%.
C) a line lying directly on the vertical axis at 100%.
D) a line lying directly on the horizontal axis.
The Gini coefficient is
A) a commonly used measure of the degree of inequity in an income distribution.
B) a commonly used measure of the degree of inequality in an income distribution.
C) the most common way of representing the income distribution graphically.
D) the ratio of the percentage of total income received by the top 20% of families to the percentage of total income received by the bottom 20% of families.
A Gini coefficient of zero means that the
A) all the income is received by the top 20% of the income distribution.
B) one person has all the income and everyone else has nothing.
C) the income is split equally between the top 20% and the rest of the distribution.
D) income is equally distributed.
A Gini coefficient of one means that
A) all the income is received by the top 20% of the income distribution.
B) income is distributed equally.
C) one family has all the income and everyone else has nothing.
D) the income is split equally between the top 20% and the rest of the distribution.
Which of the following is NOT a major cause of inequality of incomes.
A) family background
B) income from investments
C) education and training
D) wage and salary income
In the UK the main form of wealth is
A) National Savings and bank deposits.
B) consumer durables.
C) houses and flats
D) Stocks and shares.
Which of the following suggested cures for inequality would NOT be supported by the political right?
A) a national minimum wage
B) cutting welfare benefits
C) education and training
D) reducing the power of employees over wages
Which of the following suggested cures for inequality would NOT be supported by the political left?
A) a national minimum wage
B) reducing the power of employees over wages
C) increased investment
D) education and training
In the UK, the Official measure of absolute poverty shows
A) households with an income below the average
B) households who qualify for income support
C) households below 60% of median incomes from 2010/11
D) households below 60% of median incomes in the current year
According to the Laffer curve, if the economy is on the negatively sloped section of the curve, then
A) both an increase and a decrease in tax rates will decrease tax revenues.
B) both an increase and a decrease in tax rates will increase tax revenue.
C) a decrease in the tax rate will increase tax revenue.
D) an increase in the tax rate will increase tax revenue.
According to the Laffer curve, as tax rates increase, tax revenues
A) decrease continuously
B) initially decrease and then increase.
C) rise continuously.
D) initially increase and then decrease.
According to the Laffer curve
A) the supply of labour is highly inelastic
B) the income effect is bigger than the substitution effect
C) higher taxes will always lead to higher tax revenues.
D) the substitution effect is bigger than the income effect.
According to Piketty
A) Capitalism naturally leads to falling inequality
B) The state should reduce taxes to help reduce inequality
C) Wealth grows faster than output
D) Output grows faster than wealth
The market theory of earnings differentials assumes that
A) Labour is highly immobile between occupations
B) Dangerous jobs will be paid less than safer ones
C) Jobs which require more training and education will be paid less than those which require none
D) Differences in earnings are explained by compensating differences
The theory of segmented markets assumes that
A) There is high labour mobility between occupations
B) Trade unions have no impact on earnings differences
C) The labour market is divided into a series of non-competing occupational groups
D) Earnings differences are fully explained by investments in human capital
Which two of the following are likely to represent the views of ‘Commutative Justice’?
A) Each person should receive an income according to their productivity performance
B) Difference in the distribution of income and wealth are normal for any society
C) Each person should receive income according to need
D) The free market economy automatically solves the inequality problem
E) A certain amount of social control is needed in an economy to achieve a fair distribution of
Which two of the following are likely to represent the views of those interested in ‘Distributive Justice’?
A) Each person should receive an income according to their productivity performance
B) Difference in the distribution of income and wealth are normal for any society
C) Each person should receive income according to need
D) The free market economy automatically solves the inequality problem
E) A certain amount of social control is needed in an economy to achieve a fair distribution of income
Which two of the following are most likely to reflect a move towards a more equal distribution of income?
A) The share of total income going to the top 20% of income earners rises from 40% to 50%
B) The Gini coefficient falls towards zero
C) The Gini coefficient rises towards one
D) The share of income going to the bottom 20% of income earners falls from 8% to 7%
E) The share of total income going to the bottom 50% of income earners rises from 40% to 50%
Which two of the following are most likely to be associated with an increase in the incidence of poverty?
A) The Gini coefficient falls substantially
B) The real income of those in the top 20% of income earners falls by 10%
C) The number of households earning below 50% of average incomes has increased substantially
D) The number of single persons with children and of single pensioners has increased substantially
E) The number of people earning below the level of income support has decreased
Which two of the following are the most likely reasons why the share of income going to employees has increased over the past hundred years?
A) The productivity of labour has risen faster than the productivity of capital
B) Increased investment in education and training has led to a more highly skilled labour force
C) Self employment income has increased faster than GDP
D) The growth of the operating surplus of private corporations has risen faster than GDP
E) There has been a rapid growth of labour-saving technology in the service industry
The direct exchange of goods and services for other goods and services is
A) a legal tender exchange.
B) a fiat exchange.
C) a unit of account exchange.
D) barter.
Mike makes excellent cheesecake and Sue is very good at changing the oil in a car. Sue agrees to change the oil in Mike's car, if he makes her a cheesecake. This is an example of
A) fiat money.
B) legal tender.
C) commodity money.
D) barter.
The development of money as a medium of exchange has facilitated the expansion of trade because
A) holding money increases people's income.
B) holding money increases people's wealth.
C) money eliminates the barter "double coincidence of wants" problem.
D) no other mediums of exchange are available.
A medium of exchange is
A) the ability to buy something today but to defer payment to the future.
B) a standard unit that provides a consistent way of quoting prices.
C) what sellers generally accept and buyers generally use to pay for goods and services.
D) an asset that can be used to transport purchasing power from one period of time to another.
A store of value is
A) an asset that can be used to transport purchasing power from one period of time to another.
B) the ability to buy something today but to defer payment to the future.
C) what sellers generally accept and buyers generally use to pay for goods and services.
D) a standard unit that provides a consistent way of quoting price.
The main disadvantage of using money as a store of value is that
A) the value of money actually falls when the prices of goods and services rise.
B) currency is intrinsically worthless.
C) it requires a double coincidence of wants.
D) money is not portable.
The liquidity property of money is the property that makes money
A) a good store of value and a good standard of deferred payment.
B) a good medium of exchange and a good store of value.
C) a good medium of exchange and a good unit of account.
D) a good store of value and a good unit of account.
Money that can be directly used for transactions is
A) broad money.
B) M4.
C) narrow money.
D) near money.
A loan made by a bank is considered ________ of that bank.
A) a liability
B) capital
C) an investment
D) an asset
A deposit in a bank is considered ________ of that bank.
A) capital
B) a liability
C) an asset
D) an investment
Northland Bank plc has £600 million in deposits. Required liquidity ratio is 10%. Bank must keep ________ in liquid assets.
A) £6 million
B) £160 million
C) £60 million
D) £100 million
Banks can create money
A) by making loans that result in additional deposits.
B) by offering financial services, such as money market accounts.
C) by paying interest to their depositors.
D) only by illegally printing additional currency notes.
The value by which total deposits can increase for every pound increase in reserves is the
A) liquidity ratio.
B) money multiplier.
C) credit limit.
D) none of the above.
Which of he following activities is one of the responsibilities of the Bank of England?
A) advising on income tax rates
B) ensuring that there is sufficient liquidity in the financial system
C) administration of the indirect taxation system
D) auditing central and local government accounts
The central bank of the United Kingdom is known as
A) the Bank of England.
B) the Treasury.
C) Lloyds
D) the money market.
Which of the following activities is NOT one of the responsibilities of the Bank of England?
A) managing exchange rates
B) administering the tax system.
C) clearing interbank payments
D) regulating the banking system.
Retail Deposits + Wholesale Deposits + Certificates of Deposit (CDs) + cash in circulation =
A) M4
B) M2
C) M0
D) None of these
Close substitutes for transactions money are known as
A) token monies.
B) legal tender.
C) commodity monies
D) near monies.
The quantity theory of money assumes
A) velocity is unstable
B) output is below the full employment level
C) increases in the money supply lead to increases in real GDP
D) increases in the money supply lead to increases in the general level of prices
M0 consists of
A) Banks' till money + operational balances at the Bank of England.
B) Banks' operational balances at the Bank of England + Private sterling sight deposits.
C) Notes and coins in circulation with the public + banks' till money + operational balances at the Bank of England.
D) Banks' till money + operational balances in the Bank of England + private sterling sight deposits.
The main reason that people hold money - to buy things - is referred to as the
A) transactions motive.
B) profit motive.
C) precautionary motive.
D) speculation motive.
When economists speak of the "demand for money", which of the following questions are they asking?
A) How much wealth would you like?
B) What proportion of your financial assets do you want to hold in non-interest bearing forms?
C) How much cash do you wish you could have?
D) How much income would you like to earn?
By August 2016, the total amount of the Quantitative Easing programme in the UK reached
A) £445 million
B) £445 billion
C) £375 Billion
D) £44.5 Billion
The Monetary Policy Committee of the Bank of England has a target to achieve
A) 2% RPI Inflation
B) 2% CPI Inflation
C) 2% GDP growth
D) 2% PSNCR as a share of GDP
From 2009-2016, the Bank of England official interest rates
A) stayed constant at 5%
B) varied between 4.5% and 5.75%
C) fell to -5%
D) remained constant at 0.5%
Which of the following would appear as a liability in a retail bank's balance sheet?
A) loans to customers
B) money at call and short notice
C) bills discounted
D) deposits of customers
E) none of the above
A commercial bank can create money by
A) selling some of its investment securities
B) increasing its reserves
C) lending its excess reserves
D) printing more cheques
E) buying government bonds
Other things equal, individuals are likely to desire fewer money balances when interest rates are high
A) because they cannot afford to borrow as much at high interest rates
B) since high interest rates imply high opportunity costs associated with holding money
C) because such times are also characterised by falling prices so money is spent more quickly
D) since high interest rates imply high prices for bonds which makes bonds more attractive for investors
E) none of the above
A general increase in interest rate levels will, all other things being equal, automatically lead to
A) an increase in the demand to hold money
B) a decrease in the value of money
C) an increase in the supply of money
D) a decrease in the price of government bonds
E) all of the above
Which of the following will cause an increase in the demand for money?
A) an increase in real GDP
B) a decrease in nominal GDP
C) an increase in the nominal interest rate
D) an increase in the real interest rate
If, at the current interest rate, the quantity of money demanded exceeds the quantity supplied
A) bond prices will rise and the interest rate will fall
B) both bond prices and the interest rate will fall
C) both bond prices and the interest rate will rise
D) bond prices will fall and the interest rate will rise (SHORTAGE OF LIQUIDITY, SO PEOPLE SELL BONDS)
Quantitative Easing (QE) involves
A) the illegal printing of money
B) the cancellation of the national debt
C) an increase in the budget deficit
D) the creation of new money caused by the central bank purchasing government securities
E) the central bank purchasing assets financed by the sale of other assets
The deposit multiplier implies that total deposits increase by a multiple of an initial new deposit.
TRUE
FALSE
According to Keynesian monetary theory, the interest rate is determined by the intersection of the supply and demand for money.
TRUE
FALSE
Economists often compare perfect competition and monopoly. They criticise monopolies for producing ________ and charging ________.
A) more; less
B) less; less
C) more; more
D) less; more
Which type of merger is likely to be the most damaging to competition?
A) Horizontal
B) Conglomerate
C) Vertical
D) Corporate
Supporters of antimonopoly enforcement argue that the real gain from such enforcement
A) is the revenue generated from the fines paid by those individuals who are found guilty of antitrust violations.
B) is that it encourages firms to engage in research, which leads to new products being produced.
C) is that it forces firms to produce efficiently.
D) is that this policy serves to deter firms from engaging in such practices as collusion, price-fixing and deceptive advertising.
Antimonopoly laws are based on the proposition that
A) regulation is the best way to achieve efficiency.
B) public ownership is the best way to achieve efficiency.
C) competition is the best way to achieve efficiency.
D) increasing market power is the best way to achieve efficiency.
A horizontal merger is a merger of
A) firms at various stages in a production process.
B) firms producing complementary products.
C) firms producing the same product.
D) firms producing unrelated products.
A merger in which firms at various stages in a production process combine is a
A) horizontal merger.
B) production merger.
C) conglomerate merger
D) vertical merger.
A merger between a paper producer and a book publisher is an example of
A) a vertical merger.
B) a complementary products merger.
C) a conglomerate merger.
D) a horizontal merger.
A conglomerate merger is a merger of
A) firms producing unrelated products.
B) firms at various stages in a production process.
C) firms producing the same product.
D) firms producing complementary products.
A firm charging different buyers different prices for the same product is practising
A) price fixing.
B) price discrimination.
C) price discounting.
D) competitive pricing.
When firms make a profit in one market and sell at a loss in another it is called
A) competitive pricing
B) price fixing.
C) cross-subsidisation.
D) price discrimination.
Which of the following is a form of collusion?
A) individual resale price maintenance
B) cross-subsidisation
C) a cartel
D) price discrimination
In January 2011 the acquisition of McAfee by Intel
A) was blocked by the European Commission.
B) was approved unconditionally by the European Commission.
C) was approved by the European Commission, conditional upon a set of commitments ensuring fair competition in the sector of computer security.
D) was not dealt with by the European Commission because they are US companies.
What is the main criterion used in the UK when deciding whether action should be taken against a firm with monopoly power?
A) Whether it engages in excessive advertising.
B) How much its share of the market exceeds 25 per cent.
C) Whether it is achieving economies of scale.
D) How high its profits are.
E) Whether its behaviour is anti-competitive.
Since 2012, which of the following are concerned with mergers which apply to activity entirely within the UK?
A) The Director General of Fair Trading
B) The OFT [Office of Fair Trading]
C) The CMA [Competition and Markets Authority]
D) The President of the Board of Trade
E) The European Commission
Which of the following refers to a situation in which the merger results in over 25% of the market in the hands of the merged firms
A) Restrictive practice
B) Herfindahl – Hirschman Index
C) ‘Share of supply’ test
D) Gateway condition
E) ‘Assets’ test
Before 2012, which of the following had the responsibility for making an initial decision as to whether a proposed merger is likely to result in a 'lessening of competition'?
A) Monetary Policy Committee
B) Competition Commission (CC)
C) Office of Fair Trading (OFT)
D) Chancellor of the Exchequer
E) Secretary of State for Business Innovation and Skills
Since 2012, which of the following is responsible for investigating cases and deciding whether or not a proposed merger should proceed?
A) Competition Commission (CC)
B) Office of Fair Trading (OFT)
C) Competition and Markets Authority (CMA)
D) Director General of Fair Trading (DGFT)
E) Secretary of State for Business Innovation and Skills
Which of the following refers to a situation in which the merger involves gross world-wide assets exceeding £70m in value?
A) Gateway condition
B) ‘Turnover’ test
C) ‘Share of supply’ test
D) Herfindahl – Hirschman Index
E) Restrictive practice
Which of the following provides a judicial review of a mergers-decision made by the CMA or Secretary of State for Business Innovation and Skills?
A) Office of Fair Trading (OFT)
B) Chancellor of the Exchequer
C) Competition Commission
D) Secretary of State for Business Innovation and Skills
E) Competition Appeal Tribunal (CAT)
Involving a firm in the same business and at the same stage of production.
A) Organic growth
B) Horizontal integration
C) Forward vertical integration
D) Lateral integration
E) Conglomerate integration
F) Backward vertical integration
Involving a firm in a totally unrelated business.
A) Organic growth
B) Horizontal integration
C) Forward vertical integration
D) Lateral integration
E) Conglomerate integration
F) Backward vertical integration
Towards the final consumer.
A) Organic growth
B) Horizontal integration
C) Forward vertical integration
D) Lateral integration
E) Conglomerate integration
F) Backward vertical integration
Involves firms in different product areas, but with some common elements (e.g. Common factor inputs or product outlets).
A) Organic growth
B) Horizontal integration
C) Forward vertical integration
D) Lateral integration
E) Conglomerate integration
F) Backward vertical integration
Towards the raw material supplier.
A) Organic growth
B) Horizontal integration
C) Forward vertical integration
D) Lateral integration
E) Conglomerate integration
F) Backward vertical integration
Supporters of the “Contestable” markets theory believe that it is more important to look at potential competition than current market shares.
TRUE
FALSE
When there is increased likelihood of collusion following a merger, this is known as a unilateral effect
TRUE
FALSE
The ‘Share of Supply Test’ to qualify for investigation of a merger states that 25% or more of the market in the UK as a whole or in a substantial part of the UK must be in the hands of the combined firms.
TRUE
FALSE
The Secretary of State for Business Innovation and Skills must implement all CMA recommendations.
TRUE
FALSE
The Director General of Fair Trading (DGFT) currently heads the Competition and Markets Authority (CMA)
TRUE
FALSE
If production costs are the same, competitive markets are likely to bring about
A) higher prices.
B) lower output.
C) abnormal profits.
D) greater social welfare.
The EU Commission can impose a fine on firms which engage in cartels up to
A) 2% of turnover.
B) 4% of turnover.
C) 6% of turnover
D) 10% of turnover.
The existence of market dominance is sufficient evidence for the EU Commission to take action against a firm
TRUE
FALSE
When a firm sells below cost with the aim of forcing its competitors to leave the market, this is called
A) refusal to supply.
B) price discrimination.
C) predatory pricing.
D) competitive pricing.
State aid is prohibited in cases where a government uses money to
A) promote research & development.
B) protect the environment & culture
C) develop disadvantaged regions
D) provide subsidies to help firms compete against firms in other EU states.
Illegal non-payment of taxes is called
A) privatisation.
B) tax evasion.
C) creative accounting
D) tax avoidance.
An amount of income on which tax need not be paid is called a
A) tax threshold
B) tax allowance
C) transfer payment
D) payment in lieu.
The rate of tax applied to most people's incomes is called a
A) tax threshold
B) basic rate
C) marginal tax.
D) tax allowance.
The UK's main tax on a broad range of goods and services is called
A) an Excise duty
B) VAT.
C) sales tax.
D) income tax.
Which of the following are direct taxes?
A) Corporation Tax and Excise Duty on Petrol
B) Corporation Tax, Excise Duty on Petrol and Income Tax
C) Corporation Tax, Excise Duty on Petrol, Income Tax and VAT
D) Corporation Tax and Income Tax
E) Income Tax and VAT
A tax which is a fixed amount irrespective of the value of the good is called
A) specific
B) proportional.
C) ad valorem.
D) an Excise duty.
A tariff is
A) an ad valorem tax
B) the rate at which a tax will be applied.
C) a tax on imports
D) an Excise duty.
A progressive income tax means that those with a higher income pay
A) the same percentage of their income in taxes as low-income people.
B) a lower percentage of their income in taxes than low-income people.
C) a higher percentage of their income in taxes than low-income people.
D) all the taxes in the economy.
A tax whose burden, expressed as a percentage of income, falls as income increases, is a
A) regressive tax.
B) proportional tax.
C) specific tax.
D) progressive tax.
A tax whose burden is the same proportion of income for all households is
A) an ad valorem tax
B) a proportional tax.
C) a progressive tax.
D) a regressive tax.
A tax whose burden, expressed as a percentage of income, increases as income increases is
A) a progressive tax
B) a proportional tax.
C) a regressive tax
D) a tariff.
An example of a regressive tax is
A) corporation tax
B) tobacco excise tax.
C) a luxury tax
D) individual income tax.
An example of a progressive tax is
A) import tariffs.
B) V.A.T.
C) beer duty.
D) individual income tax.
Fiscal policy refers to
A) the spending and taxing policies used by the government to influence the economy.
B) the government's ability to regulate a firm's behaviour in the financial markets.
C) the techniques used by a firm to reduce its tax liability.
D) the behaviour of the nation's central bank, regarding the nation's money supply.
If central government's spending exceeded its tax receipts in 2017, the country would have a
A) public sector borrowing requirement.
B) national debt.
C) monetary deficit
D) budget deficit
If the budget deficit is lower than it was last year, we could say that
A) ceteris paribus, the level of aggregate demand will be lower than it was last year.
B) the level of aggregate demand will be higher than it was last year.
C) the national debt has fallen.
D) the government must have an expansionary fiscal stance.
The difference between what a government spends and what it collects in taxes in a year is
A) the government debt.
B) net taxes.
C) net revenue
D) the budget deficit.
The excess of the central government's tax receipts over its spending is called the
A) net revenue.
B) budget surplus.
C) budget deficit
D) PSNCR.
When a deficit, surplus or debt is referred to as "general government" this means it concerns
A) the public sector
B) central and local government only.
C) central government only
D) this year's accounts only.
Fiscal stance refers to
A) a government that takes a tough stance when it comes to running the country's finances.
B) a government that is running a budget deficit.
C) whether a government is pursuing an expansionary or contractionary fiscal policy.
D) a government that prefers the use of fiscal to monetary policy for demand management.
Which of the following is NOT an automatic stabiliser?
A) unemployment benefit
B) government expenditure on road building programmes
C) income support
D) VAT
An automatic stabiliser is
A) an attempt to change tax rates to alter aggregate demand.
B) an element of government spending or taxation which counteracts the movements of the business cycle.
C) the tendency for the budget deficit to rise as the economy expands.
D) an attempt to change government spending tax rates to alter aggregate demand.
Deliberate changes in tax rates and levels of government spending to influence the level of aggregate demand are called
A) fiscal policy
B) fiscal stance.
C) discretionary fiscal policy.
D) automatic stabilisers.
Which two of the following are consistent with the idea of automatic fiscal stabilisers?
A) The fact that the tax of unleaded petrol is lower than that on leaded petrol.
B) The fact that as people’s incomes increase the amount that they pay in taxes also increases.
C) The fact that people sent to prison do not receive benefits.
D) The fact that government spending falls during ‘boom’ times as unemployment falls.
Which two of the following represent explanations of the rise in government spending are based on ‘microeconomic analysis’?
A) ‘Displacement theory’ which suggests that public spending is ratcheted upwards over time by social upheavals – as in the case of economic depressions or wars.
B) The state providing ‘public goods’ and ‘merit goods’ free at the point of use, which private markets are unable to do.
C) Rise in a country’s real national income, when public services are ‘normal’ products with high income elasticities of demand.
D) Change in the composition of the various public sector ‘markets’ leading to greater public spending (e.g. Ageing population incurring greater expenditure on healthcare).
E) Increased privatisation reducing the role of the public sector.
Which two of the following represent explanations of the rise in government spending are based on ‘macroeconomic analysis’?
A) ‘Displacement theory’ which suggests that public spending is ratcheted upwards over time by social upheavals – as in the case of economic depressions or wars.
B) The state providing ‘public goods’ and ‘merit goods’ free at the point of use, which private markets are unable to do.
C) Rise in a country’s real national income, when public services are ‘normal’ products with high income elasticities of demand.
D) Change in the composition of the various public sector ‘markets’ leading to greater public spending (e.g. Ageing population incurring greater expenditure on healthcare).
E) Increased privatisation reducing the role of the public sector.
Which two of the following are often used as arguments for restricting the size of the public sector?
A) Public sector ‘crowding out’ the private sector
B) Lower taxes reducing incentives to work, save and take risks
C) Higher taxes reducing incentives to work, save and take risks
D) Greater public provision is needed to offset poverty and inequalities
E) ‘Market failures’ of various kinds can only be corrected by government intervention
Which two of the following are often used as arguments for expanding the size of the public sector?
A) Public sector ‘crowding out’ the private sector
B) Lower taxes increasing incentives to work, save and take risks
C) Higher taxes reducing incentives to work, save and take risks
D) Greater public provision is needed to offset poverty and inequalities
E) ‘Market failures’ of various kinds can only be corrected by government intervention
Which two of the following are defined as sources of government revenue from indirect taxes?
A) Petroleum revenue tax
B) VAT
C) Inheritance tax
D) Capital gains tax
E) Fuel duties
Which two of the following are the most accurate indicators of the government’s budgetary situation (fiscal stance) in any given year?
A) Public sector net cash requirement
B) Public sector receipts
C) Income tax schedules
D) Public sector borrowing requirement
E) Surplus on current account.
The OBR forecasts that UK national debt relative to national income in 2017/8 will be
A) 68.8%
B) 88.8%
C) 108.8%
D) 188.8%
Following the financial crisis in 2009-10, the UK had its largest ever budget deficit of £151.6 billion. This equated to
A) 5.9% of National Income
B) 7.9% of National Income
C) 9.9% of National Income
D) 15.9% of National Income
In financial markets, “gilts” are
A) UK equities
B) The sterling dollar exchange rate
C) The national debt
D) UK government securities
In 2016/17, UK government spending was approximately
A) 29.3% of National Income
B) 39.3% of National Income
C) 49.3% of National Income
D) 59.3% of National Income
Extra output of the firm emits CO2 and pollutes the environment.
A) Monopoly power
B) Information asymmetry
C) Positive externality
D) Public good
E) Monopsony power
F) Negative externality
The firm employs almost all the labour force in a particular town.
A) Monopoly power
B) Information asymmetry
C) Positive externality
D) Public good
E) Monopsony power
F) Negative externality
The firm is aware of a design fault, the buyer is not.
A) Monopoly power
B) Information asymmetry
C) Positive externality
D) Public good
E) Monopsony power
F) Negative externality
Extra output of the firm creates employment opportunities in a deprived area
A) Monopoly power
B) Information asymmetry
C) Positive externality
D) Public good
E) Monopsony power
F) Negative externality
The firm finds it impossible to exclude people from consuming the product even if they don’t pay.
A) Monopoly power
B) Information asymmetry
C) Positive externality
D) Public good
E) Monopsony power
F) Negative externality
The Public Sector Borrowing Requirement (PSBR) has been replaced by a new definition, the Public Sector Net Cash Requirement (PSNCR)
TRUE
FALSE
N the UK, the share of government spending in National Income is higher than France and Finland, but lower than the USA and South Korea
TRUE
FALSE
The ‘golden’ rule of the previous Labour government stated that over the economic cycle the government will only borrow to invest and will not borrow to fund current expenditure
TRUE
FALSE
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