Draw a diagram to show how the supply curve shifts when an ad valorem tax is introduced on a good or service.
Question 3
3.
Question 4
4.
Question 5
5.
Question 6
6.
Question 7
7.
Draw a diagram to show how the setting of a maximum price for a good can result in excess demand.
Question 8
8.
Explain what a surplus and a deficit are on the current account of the balance of payments
Question 9
9.
Question 10
10.
Question 11
11.
Question 12
12.
Question 13
13.
List four methods a government might adopt to remove a persistent trade deficit
Question 14
14.
Question 15
15.
The diagram shows the impact of a specific indirect tax imposed on a demerit good. The revenue received by the government would equal:
£2000
£400
£1600
£800
Which of the following is the MAIN advantage of using indirect taxes on goods with negative externalities?
They raise government revenue, which can be used to subsidise other goods and services.
They help internalise external costs, reducing overconsumption of harmful goods.
They encourage businesses to produce more of the taxed goods, boosting economic growth.
They eliminate the negative externalities associated with harmful goods entirely.
What is a potential drawback of using indirect taxes to reduce negative externalities?
They always lead to a complete ban on the good.
They can be regressive, disproportionately affecting lower-income individuals.
They have no impact on consumer behaviour.
They only affect producers and not consumers.
The diagram shows the impact of a subsidy on a merit good. Government expenditure on the subsidy would equal:
GFJ
OLFC
ACFJ
EFG
What is likely to be the most effective policy solution to overcome the market failure caused by the existence of positive externalities of production?
Competition policy
Regulation
Subsidy
Taxation
Calculate the percentage change in the United States current account deficit between 1998 and 2006.
10%
30%
22.5%
300%
What would a shift in the long run aggregate supply curve to the right be most likely to cause?
A decrease in the level of income inequality
A decrease in the rate of inflation
An increase in the current account deficit
An increase in unemployment
What is most likely to lead to a persistent surplus in a country's current account of its balance of payments?
A low domestic savings rate
An undervalued exchange rate
Highly protectionist policies by other countries
Low investment income from abroad
Which policy is not likely to help reduce a deficit on the current account of a country's balance of payments?
An increase in expenditure promoting locally-produced goods
An increase in the quota on cheap imports
An increase in subsidies to exporting industries
An increase in the restrictions on foreign exchange
What is the impact of the Marshall-Lerner condition holding?
An exchange rate appreciation will only reduce a current account deficit in the long run
An exchange rate appreciation will reduce a current account deficit
An exchange rate depreciation will only reduce a current account deficit in the long run
An exchange rate depreciation will reduce a current account deficit
An economy's current account on the balance of payments is in surplus. The exchange rate is re-valued by the government.
Assuming the Marshall-Lerner condition holds, which diagram shows the impact on the current account balance?