Name:
Grade:
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Topic: Taxation and Inflation
1. In March 2000 the Ministry of Trade and Industry in Singapore stated that GDP
grew by 5.4% in the previous year. This produced higher revenues from taxation
and resulted in a budget surplus. What may be concluded from this statement?
A.
B.
C.
D.
The change in GDP was caused by a change in taxation.
The government had increased the rate of taxation and the expenditure on its services.
The national income of the country had increased and so more was paid in taxes.
There had been economic growth because the government had reduced its expenditure
and budgeted for a surplus.
2. What would be most likely to reduce the rate of inflation?
A.
B.
C.
D.
an increase in direct taxes
an increase in government expenditure
an increase in indirect taxes
an increase in the budget deficit.
3. During 2000 the price of crude oil rose to record levels. How would this be likely to
affect the balance of payments and the rate of inflation of an oil importing country
in the short run?
4. ‘Inflation falls from 10 % to 3 %’. This means there was a fall in
A.
B.
C.
D.
the cost of borrowing.
the price level.
the rate of increase in prices.
the standard of living.
5. The following are a government’s receipts from taxation. What is the total amount
of revenue raised from direct taxes?
A $340 m
B $585 m
C $670 m
D $785 m
6. A government wishes to raise the general standard of living in its country. In the
short run, which policy would be the most likely to achieve this aim?
A.
B.
C.
D.
preventing the merger of two companies into a monopoly
raising taxation to repay a loan
reducing the rate of income tax while maintaining the services it provides
Spending more on roads in rural areas rather than in city centers.
7. In 1994 the government of Singapore removed taxes from 406 products imported
into the country. 96% of all imports are now tax- free. What will be the effect of this
change on the cost of living and on government revenue?
8. The rate of inflation in the UK in 2001 was very low. Which of the government
objectives does this directly meet?
A.
B.
C.
D.
balance of payments stability
economic growth
full employment
price stability
9. The government of a country used fiscal policy to achieve price stability. What is another way
of saying this?
A. The government increased taxes to achieve low inflation.
B. The government reduced the money supply to achieve low inflation.
C. The government used interest rates to achieve economic growth.
D. The government used restrictions on banks to achieve stable exchange rates.
10. Which is a description of indirect taxes?
A.
B.
C.
D.
They are easy to avoid and deter effort.
They are levied on income and cause inflation.
They are levied on spending and are regressive.
They are progressive and discourage consumption.
11. In a country, income tax is charged at $50 on an income of $500. Compared with this, which
of the following would indicate that the income tax scale was progressive?
A.
B.
C.
D.
$150 tax on $2000 income
$300 tax on $3000 income
$450 tax on $4000 income
$480 tax on $5000 income
12. In constructing a retail price index, what is not used?
A.
B.
C.
D.
a base year
the prices of a basket of goods
the wage rate
a weight given to each good.
13.
A.
B.
C.
D.
What is most likely to be a reason for taxing oil?
to conserve oil resources
to encourage economic growth
to create employment
to reduce oil prices.
14. The table shows figures from a developing economy. Which of the following statements is not
true?
A.
B.
C.
D.
Consumer prices rose 80% between 1995 and 1996.
The cost of living rose in every year.
The purchasing power of money rose throughout the period.
Inflation existed throughout the period.
15. A government taxes the production of cars. What is likely to decrease?
A.
B.
C.
D.
the cost of supplying cars
the price of cars
the revenue for the government
the supply of cars at every price.
16. Which statement describes a progressive tax?
A.
B.
C.
D.
a tax that increases government income over time
a tax that places an increasing burden on the poor
a tax that rises in line with the rate of inflation
a tax that has a higher rate as income rises
17. The diagram shows the annual rate of inflation for a country between 2000 and 2003.
Which statement is true of the period 2000 to 2003?
A. The cost of living fell.
B. The price level rose.
C. The retail price index fell.
D. The value of money rose.
18. In September 2002 a government minister warned that tax changes were necessary to
redistribute wealth from rich to poor. Which policy would be likely to achieve that aim?
19. Which of the following is the most obvious sign of inflation?
A. a rise in imports
B. a rise in the Gross Domestic Product (GDP)
C. a rise in the national debt
D. a rise in the retail price index
20.
A.
B.
C.
D.
A country is experiencing inflation. What must be increasing?
wage levels
the output of goods and services
the amount of money spent on goods and services
the amount of money needed to purchase a given quantity of goods and services.
21. The rate of inflation in the UK in 2001 was very low. Which of the government
objectives does this directly meet?
A.
B.
C.
D.
balance of payments stability
economic growth
full employment
price stability
22. Inflation in Argentina fell from 400 % in the 1980s to 15 % in the 1990s. What could have been
a result of this change?
23.
A. falling prices
B. fewer exports from Argentina
C. lower wage rises
D. a trade deficit
Mark Scheme MCQs : Inflation and taxation
1
2
3
4
5
6
7
8
9
10
11
C
C
D
C
C
C
A
D
B
C
C
12
13
14
15
16
17
18
19
20
21
22
C
B
C
D
D
B
A
D
D
D
C