Take this Exam: A-Level Economics: Fiscal and Monetary Policy | Zestly

Question 1

Which of the following are considered components of the monetary policy transmission mechanism?

Accepted Answer

The effect of interest rate changes on market interest rates for consumers and firms.

Question 2

If a government adopts a contractionary fiscal policy stance, what is the expected impact on the economy?

Accepted Answer

A reduction in aggregate demand to curb inflationary pressure.

Question 3

Which of the following best explains the concept of 'systemic risk' in the financial sector?

Accepted Answer

The risk that the failure of one financial institution triggers a chain reaction causing a collapse of the entire financial system.

Question 4

Which of the following are examples of direct taxation?

Answer

Income tax.

Answer

Value Added Tax (VAT).

Answer

Corporation tax.

Answer

Excise duties on fuel.

Answer

Customs tariffs.

Question 5

What is the primary function of financial markets in the real economy?

Answer

To ensure that all individuals have equal wealth.

Answer

To facilitate the flow of funds from savers to borrowers for investment.

Answer

To provide a mechanism for the government to set interest rates.

Answer

To eliminate all forms of risk for private investors.