Acca paper F1 fia diploma in Accounting and Business Accountant in Business (AB/fab) exam kit

89 
A – TRUE 
Rapid growth tends to lead to rising incomes, which often increases demand by the 
population for imported goods. 
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P AP E R F 1 ( F A B )
: A CCOU N TAN T IN B US INES S
 
134 
KA P LA N P UBL I SH IN G 
90 B 
Given the high rate of unemployment, the government of country Y is likely to be suffering 
from a fall in its tax receipts (unemployed individuals have lower earnings to tax). The 
government will also have to pay more in social security to support the increasing number 
of workers who are without jobs. The other three statements are correct. 
91 B 
Macroeconomic policy objectives tend to be management of economic growth, inflation, 
employment and a sustainable balance of payments. Why the money supply and trade 
surpluses may be used by the government to achieve its policies, they are not objectives in 
themselves. 
92 D 
Expectations are often self-fulfilling as people adjust their behaviour based on the 
predictions made, such as the belief that house prices will continue to grow will cause 
people to buy a house to make a quick gain, which in its turn inflates the prices of houses. 
93 B 
A deflationary gap occurs when there is insufficient demand in the economy. Having a 
budget deficit means that the government is putting money in the economy, for example 
by employing more people, who will use their earning to buy goods produced in the 
country, thus giving jobs to even more people. C and D are a part of the monetary policy. 
94 D 
A recession starts when demand begins to fall and leads to reduced purchases of raw 
materials and increased unemployment; this in turn leads to reduced household incomes 
and a further fall in demand, which can result in a slump.