Lesson 2.6.2

2.6.2 Demand-side policies Quiz: Pearson Edexcel Economics, Unit 2

20 questions

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Lesson 2.6.2, Demand-side policies: 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 demand-side policy is controlled directly by the UK government rather than the central bank?

    • Monetary policy
    • Exchange rate policy
    • Supply-side policy
    • Fiscal policy

  2. Which interest rate is set by the Bank of England's Monetary Policy Committee?

    • Exchange rate
    • Bank Rate
    • Corporation tax rate
    • Income tax rate

  3. What asset does the central bank primarily purchase when implementing quantitative easing?

    • Government bonds
    • Commercial property
    • Consumer goods
    • Foreign currencies

  4. Which two main instruments make up a government's fiscal policy?

    • Interest rates
    • Exchange rates
    • Tariffs and quotas
    • Taxation and spending

  5. What term describes a situation where government spending exceeds tax revenue in a year?

    • Trade deficit
    • Current account surplus
    • Budget surplus
    • Budget deficit

  6. What term describes a situation where government revenue exceeds government spending in a year?

    • Trade deficit
    • National debt
    • Budget surplus
    • Budget deficit

  7. Which of the following is an example of a direct tax in the UK?

    • Excise duty
    • Income tax
    • Value Added Tax
    • Customs duty

  8. Which of these is an example of a UK indirect tax?

    • Corporation tax
    • National Insurance
    • Income tax
    • Value Added Tax

  9. How does expansionary monetary policy affect the aggregate demand curve?

    • Shifts LRAS left
    • Shifts SRAS left
    • Shifts AD left
    • Shifts AD right

  10. How does contractionary fiscal policy affect the aggregate demand curve?

    • Shifts AD left
    • Shifts LRAS right
    • Shifts AD right
    • Shifts SRAS right

  11. What is the primary responsibility of the Bank of England's Monetary Policy Committee?

    • Setting income tax
    • Setting Bank Rate
    • Managing national debt
    • Setting council tax

  12. Running a budget deficit to stimulate economic growth is an example of which policy?

    • Expansionary monetary policy
    • Contractionary monetary policy
    • Expansionary fiscal policy
    • Contractionary fiscal policy

  13. What is a major limitation of using interest rate cuts to boost spending?

    • Higher import tariffs
    • Higher national debt
    • Time lags
    • Immediate inflation

  14. What is an advantage of using monetary policy compared to fiscal policy?

    • Lower structural unemployment
    • Higher productive capacity
    • Fast implementation
    • Reduced national debt

  15. What is a major risk associated with expansionary fiscal policy?

    • Lower inflation
    • Decreased import spending
    • Higher unemployment
    • Increased national debt

  16. According to Keynesian theory, what caused the severe downturn in the Great Depression?

    • Excessive money supply
    • High trade tariffs
    • Rapid technological change
    • Collapsing aggregate demand

  17. Which central bank policy was widely used following the 2008 Global Financial Crisis?

    • Supply-side deregulation
    • Raising income tax
    • Cutting public pensions
    • Quantitative easing

  18. Why might interest rate cuts fail to boost spending during a recession?

    • Balanced government budget
    • High productive capacity
    • Low consumer confidence
    • Strong exchange rate

  19. What term describes the process through which interest rate changes affect demand?

    • Fiscal multiplier
    • Automatic stabiliser
    • Transmission mechanism
    • Accelerator effect

  20. Who sets the official CPI inflation target for the Monetary Policy Committee?

    • European Central Bank
    • Bank of England
    • UK government
    • Monetary Policy Committee

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