IGCSE ECONOMICS UNIT 5 FROM 2010-2017

1. During 2009 some governments adopted policies to try to end the recession in their
country and increase economic growth. Which combination of policies is most likely to
achieve this?
A lower taxes and decrease government spending
B lower taxes and increase government spending
C raise taxes and decrease government spending
D raise taxes and increase government spending
2. In the first six months of 2011 a construction company, Morgan Sindall, saw its profits
fall. Part of the reason was the increased competition from foreign competitors. Which
government policy is most likely to help such a company?
A increasing benefits to the unemployed
B increasing tax-free allowances on new building projects
C putting a quota on imported raw materials used by the company
D raising interest rates
3. Which are two aims that a Government normally pursues when managing the performance
of the whole economy?
A to encourage an increase in production and to prevent high inflation
B to ensure no one is unemployed and to reduce exports
C to give everyone equal incomes and to increase government revenues
D to protect the environment and to reduce interest rates
4. In which case is success for the government in achieving the first aim likely to cause
problems in achieving the second?

5. A government lowers the rate of interest. Who is most likely to be disadvantaged by this
policy?
A house buyers
B manufacturers
C retailers
D savers
6. Which is a supply-side policy that would increase output in the long-run?
A an increase in benefit payments
B an increase in places at training colleges
C an increase in the rate of income tax
D an increase in the rate of tax employers pay

1
7. Russia exports wheat. In 2010, a bad harvest led the Russian government to prevent the
export of wheat, to ensure enough supplies were kept for domestic use. What was the
most likely outcome of the government’s action?
A prices were fixed by the wheat producers
B the amount produced was determined by the government
C the price of wheat abroad fell
D there was a redistribution of domestic production
8. A government wishes to stimulate economic recovery. Which action will assist this?
A decreasing government investment
B decreasing income tax
C increasing indirect taxation
D increasing interest rates
9. What is an expansionary monetary policy?
A a decrease in the interest rate
B a decrease in the rate of value added tax
C an increase in the power of trade unions
D an increase in the standard rate of income tax
10. A government intends to improve skills by offering free training to school leavers at age
16 until they reach 18 years. It proposes to pay for this by taxing the profits of firms.
Which policies do these proposals involve?

11. In trying to achieve one of its aims a government may make it difficult to achieve another
aim. What is an example of this conflict?
A Achieving a more even distribution of income may prevent a rise in the average
standard of living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of
payments.
12. What is a direct tax?
A a tax on electricity
B a tax on imported goods
C a tax on services
D a tax on income and wealth

2
13. When is a direct tax described as progressive?
A when the government changes the basic rate of tax in each budget
B when the government taxes companies rather than individuals
C when the tax takes a larger proportion of earnings as earnings increase
D when the tax takes a smaller proportion of earnings as earnings increase
14. In 2008, the government of Argentina imposed a tax on exports of wheat and soya beans.
What was the most likely aim of this tax?
A to increase agricultural output
B to increase exports
C to reduce a budget surplus
D to reduce the rise in domestic food prices
15. A country has a tax system which places no tax on incomes below $5000, is proportional
on incomes between $5000 and $10 000 and is progressive on incomes above $10 000.
Which graph illustrates this tax system?

3
16. The graph shows the impact of a tax on the supply of petrol (gas).

What can be concluded from this graph?

A the government will receive no tax revenue
B the impact of the tax will be shared between the consumer and the producer
C the impact of the tax will fall entirely upon the consumer
D the impact of the tax will fall entirely on the producer
17. A government collects the following revenue in a year.

What is the amount of indirect tax revenue?

A $30 m B $70 m C $100 m D $500 m
18. A government decides to make two changes to its taxation policies. It lowers the tax on
petrol and raises the tax on food. How do these changes affect the regressive nature of
the taxes?

4
19. The table shows a government’s receipts from taxation.

What is the total amount of revenue raised by indirect taxes?

A $95 m B $300 m C $400 m D $495 m
20. When is a tax progressive?
A when some goods have a higher tax than others
B when the rate of tax increases as income increases
C when the tax is linked to the rate of inflation
D when the tax is on incomes rather than on goods or services
21. The charts relate to the Financial Statement of the government of New Zealand for
2014.

What can be concluded?

A Expenditure on welfare was higher than the combined expenditure on education and
health.
B The government was $2.8 billion in surplus.
C The largest source of the government’s income was from direct taxation.
D The number of business corporations was very small.

5
22.The information below refers to an economy for a financial year.
government expenditure = $2866 million
government revenue = $1940 million
What was the budget balance of the government in that year?
A $926 million in deficit
B $4806 million in deficit
C $926 million in surplus
D $4806 million in surplus

6
ANSWERS
1. B
2. B
3. A
4. A
5. D
6. B
7. D
8. B
9. A
10. C
11. C
12. C
13. C
14. D
15. A
16. C
17. C
18. B
19. D
20.B
21. C
22.A