Bpp learning Media is an acca approved Content Provider

 
 
 
QUICK QUIZ 
BPP Tutor Toolkit Copy

---

CHAPTER 3
//
THE MACROECONOMIC ENVIRONMENT 
 
83 
 
1
B 
Monetary policy is policy on the money supply, monetary system, interest rates, exchange rates 
and the availability of credit. 
2
True. A government can increase demand by spending more itself or by reducing taxation so that firms 
and households have more after-tax income to spend. 
3
B 
This is the definition of regressive tax. 
4
B 
The disincentive effect refers specifically to the disincentive of individuals to work. 
5
A 
A flat-rate poll tax, with no concession for the lower paid, would take a higher proportion of the 
income of lower-income earners than of higher-income earners. This is a regressive tax system. 
6
B 
The main purpose of taxation will be to raise revenue for the government. Other aims might be to 
redistribute wealth or affect demand in the economy. Changes in rate of tax do not have a direct 
influence on interest rates, which can be influenced by a government's 
monetary
policies. 
7
D 
Objective 1 could be achieved by raising (or lowering) taxes on firms and lowering (or raising) 
taxes on households. Objective 2 could be achieved by raising taxation in order to reduce 
consumers' disposable income and so to reduce aggregate expenditure in the economy: these 
consequences should lead to a fall in the demand for money. Objective 3 can be achieved either 
by taxing income or by means of selective indirect taxes on certain goods. 
8
A 
Lower interest rates should be a consequence of an increase in the money supply, with a 
movement along the liquidity preference curve rather than a shift in the liquidity preference curve.