12 marks
Identify two macroeconomic aims of the Philippine government.
Refer to the source material in your answers.
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The Macroeconomic Aims of Government (CIE IGCSE Economics)
Topic Questions
2
2 marks
2 marksIn a mixed economic system, such as Portugal’s, the government intervenes in the economy. Reasons for government intervention include to correct market failure and to achieve its aims for the economy, such as control of inflation. In 2017, one-fifth of Portugal’s population was living in poverty and the government increased its spending
Define inflation
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32 marks
2 marksIn 2018, the US had its lowest unemployment rate for 18 years. Cyclical unemployment was very low and so was the rate of inflation. The US also experienced a rise in labour productivity. However, it did not do so well in reducing poverty. In 2018, approximately 12% of Americans were living in poverty.
Define unemployment
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42 marks
2 marksAustralia’s foreign exchange rate fluctuates. The value of Australia’s exports is regularly greater than the value of its imports. Australia is Papua New Guinea’s main trading partner. In 2019, the government of Papua New Guinea increased income tax to reduce its inflation rate. It used other policy measures to increase its economic growth rate
Identify two trade-offs between the macroeconomic objectives
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52 marks
2 marksThe money supply in Bangladesh increased every year from 2010 to 2018. Changes in the money supply and the foreign exchange rate can affect a government’s macroeconomic policy aims, including full employment. There have been few mergers between commercial banks in Bangladesh, although its banks are larger than many of its other firms
Define full employment
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18 marks
In a mixed economic system, such as Portugal’s, the government intervenes in the economy. Reasons for government intervention include to correct market failure and to achieve its aims for the economy, such as control of inflation. In 2017, one-fifth of Portugal’s population was living in poverty and the government increased its spending
Discuss whether or not increasing government spending will enable a government to achieve its aims for the economy
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28 marks
In February 2016, share prices on stock exchanges fell throughout the world. There were a number of reasons for this; including concerns about the slowdown in world growth, the possibility of deflation and unemployment, and fears that some commercial banks could go out of business.
Discuss whether or not government policy measures to reduce unemployment will cause inflation.
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14 marks
4 marksEconomists are uncertain about the future United States (US) macroeconomic performance. For instance, in recent years, US unemployment has fallen while the deficit on the current account of the balance of payments has fluctuated. Whether its current account deficit will rise or fall in the future may be affected by proposed tax cuts. Some economists suggest that the US government should not be concerned about the country’s current account deficit
Explain two reasons why the objectives of low unemployment and balancing the current account may conflict
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26 marks
Confidence in the government’s reform agenda led to very strong growth of India’s stock exchange index in 2017. Firms liked the supply-side policy measures that had been introduced, such as government spending on infrastructure projects including building new motorways. However, opponents of the government claimed that the government was prioritising one government aim over others.
Analyse two possible conflicts between government aims.
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31 mark
1 markThe Monetary Authority of Singapore (MAS), the government body which controls the monetary policy of the country, has allowed the Singapore dollar to appreciate. However, the high cost of the Singapore dollar has created a need for new incentives for firms, such as a reduction in taxes and granting subsidies.
Explain two impacts of expansionary monetary policy using an example
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41 mark
1 markTanzania is a low-income country with relatively high import tariffs. Between 2012 and 2015, Tanzania experienced a high economic growth rate. This allowed the government to provide more public goods. The government also increased its investment in the merit goods of education and healthcare. Tanzania’s central bank influenced household borrowing and spending with contractionary policy with the aim of achieving price stability. As a result the country’s inflation rate fell, with money losing less of its value
Explain two impacts of contractionary monetary policy using an example
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