Lesson 2.2.4

2.2.4 Government expenditure (G) Quiz: Pearson Edexcel Economics, Unit 2

20 questions

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Lesson 2.2.4, Government expenditure (G): 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 2: Theme 2: The UK economy – performance and policies, written with Revision Ninja.

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The 20 questions

  1. Which item is excluded from government expenditure when calculating Aggregate Demand?

    • Transfer payments
    • Current spending
    • Capital expenditure
    • Public sector wages

  2. Which item is included in government expenditure within Aggregate Demand?

    • State pensions
    • Unemployment benefits
    • NHS staff salaries
    • Child benefits

  3. What happens to government expenditure on welfare benefits during an economic recession?

    • It decreases automatically
    • It increases automatically
    • It remains constant
    • It stops completely

  4. What term describes deliberate changes in government spending and taxation by policy-makers?

    • Monetary policy
    • Discretionary fiscal policy
    • Automatic stabilisers
    • Supply-side policy

  5. Which measure is an example of an expansionary fiscal policy?

    • Increasing spending
    • Increasing interest rates
    • Raising tax rates
    • Reducing public borrowing

  6. If the government increases spending by 10 billion and the multiplier is 2, the effect on national income is approximately:

    • 100 billion
    • 10 billion
    • 5 billion
    • 20 billion

  7. What type of government spending is used to build long-term infrastructure like schools?

    • Current spending
    • Discretionary spending
    • Transfer spending
    • Capital spending

  8. All else equal, what effect does an increase in government spending have on a budget deficit?

    • It increases it
    • No effect
    • It decreases it
    • Eliminates it

  9. During an economic recession, what automatically happens to government tax revenues?

    • They rise
    • They double
    • They fall
    • They stay constant

  10. An ageing population directly increases government expenditure on which two main areas?

    • Transport and housing
    • Education and defence
    • Welfare and policing
    • Healthcare and pensions

  11. How does government spending on infrastructure increase long-run economic growth?

    • Increases interest rates
    • Decreases aggregate demand
    • Reduces total employment
    • Increases productive capacity

  12. What is a major constraint on a government implementing expansionary fiscal policy?

    • Low interest rates
    • Falling unemployment
    • High national debt
    • High business confidence

  13. Why does government spending on imported goods have a smaller domestic multiplier effect?

    • Interest rates rise
    • Tax revenue increases
    • Import expenditure leaks
    • Export revenue falls

  14. Why is government spending included as a component of aggregate demand?

    • Automatic welfare payment
    • Direct tax leakage
    • Direct demand injection
    • Supply-side constraint

  15. How can a government reduce its budget deficit without cutting government spending?

    • Decrease tax rates
    • Increase transfer payments
    • Lower interest rates
    • Increase tax revenue

  16. Why are transfer payments excluded from government expenditure (G) in aggregate demand?

    • They equal taxes
    • They are leakages
    • They increase inflation
    • No output produced

  17. Which of the following is an example of a government transfer payment?

    • Teacher salaries
    • NHS hospital construction
    • Child benefit
    • Military equipment purchases

  18. Government spending on goods and services is 300 billion and transfer payments are 150 billion. What is G in national income accounts?

    • -150 billion
    • 450 billion
    • 150 billion
    • 300 billion

  19. How do automatic stabilisers react during an economic recession without new legislation?

    • Spending falls automatically
    • Interest rates fall
    • Tax revenues rise
    • Spending rises automatically

  20. What is a major limitation when implementing discretionary fiscal policy?

    • Constant velocity
    • Fixed exchange rates
    • Time lags
    • Automatic compliance

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