Month: July 2025

Which of the following is an aspect of fiscal policy measures by the government?

Select ONE answer:

1. To raise short-term interest rates in the money markets
2. To support the exchange rate of the country’s currency
3. To control growth in the money supply
4. To alter rates of taxation

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > Fiscal policy is concerned with the government’s tax income, expenditure and borrowing (to make up the difference between income and expenditure).

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Which of the following are the effects of reduced interest rates?

1 Consumer spending will increase
2 Business investment will be encouraged
3 Saving will increase

Select ONE answer:

1. 1 only
2. 1 and 2 only
3. 2 and 3 only
4. 1,2 and 3

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct == > Low interest rates will encourage spending rather than saving. Investment will be encouraged because the opportunity cost of investing is reduced.
3. Not correct
4. Not correct

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Which of the following would lead to demand-pull inflation?

Select ONE answer:

1. Rising import prices
2. Increase in wages
3. Increases in indirect taxation
4. High consumer expenditure such that aggregate demand exceeds aggregate supply

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > Aggregate demand exceeding aggregate supply is an example of demand-pull inflation.

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The government may seek to reduce the rate of demand-pull inflation by any of the following means except?

Select ONE answer:

1. Reducing interest rates
2. Increasing VAT
3. Applying more stringent controls over bank lending
4. Reducing public expenditure

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > Public expenditure represents the government’s own demand. Bank lending is largely used for spending on goods and services by the people who borrow the money. Higher VAT could increase total spending on goods and services inclusive of the tax, but spending net of tax will fall, and this should result in a reduction in demand-pull inflation. Lower interest rates is likely to result in higher consumer borrowing and even stronger demand-pull inflation.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

The recession phase of the business cycle will normally be accompanied by all the following except?

Select ONE answer:

1. A rise in the rate of inflation
2. A fall in the level of national output
3. An improvement in the trade balance
4. A rise in the level of unemployment

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > Recession and declining demand go together. Inflation and declining demand do not. The trade balance is likely to improve due to a decrease in demand for imports.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.