Principles of Business for CSEC®

2nd edition

Chapter 9: The role of government in an economy

The following test paper contains four multiple-choice questions, to help you prepare for
Paper 1, and one essay question, to help you prepare for Paper 2. If you decide to complete the
paper under exam conditions, you should give yourself no longer than 30 minutes to complete all
questions.

1. Which of the following is least likely to contribute to a safe environment for investors in
a country?
(A) A stable government and clear national decision-making processes
(B) Rapid fluctuations in the level of inflation
(C) A predictable exchange rate between the national currency and other currencies
(D) Sound financial institutions, including the central bank and banking system
(1 mark)

2. Which of the following is not an environmental problem facing small-island developing

states?
(A) Rising sea levels
(B) Reduction in the availability of freshwater
(C) Flooding
(D) Sustainable development of the economy
(1 mark)

3. Funds collected from national insurance contribute towards:

(A) Providing compensation for insurable risks such as property insurance
(B) Government expenditure on education, roads and hospitals
(C) Paying the salaries of government officials
(D) Providing pension benefits for the elderly
(1 mark)

4. Government technical support for agriculture includes:

(A) Providing research-based advice on which varieties of crop to plant
(B) Financial support for the purchase of agricultural equipment
(C) The identification of zones where it is permissible to plant crops
(D) Providing subsidies when farmers lose their crops due to bad weather
(1 mark)

1 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 9: The role of government in an economy

5. (a) State three (3) examples of direct taxes.


 (3 marks)

(b) (i)  Identify four (4) responsibilities of government.


 (4 marks)

(ii)  Explain how governments reduce income inequality in a country.


 (3 marks)

2 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 9: The role of government in an economy

(c)
The government is concerned about the local poultry industry. The industry has been
struggling for decades to keep prices down as well as to produce more output. The high
prices mean that local producers cannot compete with imported poultry products.
Outline how the government can use the following to assist the poultry producers:
(i) Subsidies


 (2 marks)

(ii)  Customs duties


 (2 marks)

(d)
Discuss the importance of roads and transport to the development of:
(i) Citizens


 (3 marks)

3 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 9: The role of government in an economy

(ii) Businesses


 (3 marks)

 (24 marks)

4 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019