Lesson 4.2.1.1

4.2.1.1 The objectives of government economic policy Quiz: AQA Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.2.1.1, The objectives of government economic policy: 20 multiple choice questions for the AQA Economics (7136), Unit 2: The national and international economy, written with Revision Ninja.

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The 20 questions

  1. Which of the following is one of the four main macroeconomic objectives of UK government policy?

    • Wealth equality
    • Low interest rates
    • Balanced budget
    • Price stability

  2. Which short-run trade-off occurs when a government uses expansionary policy to reduce unemployment?

    • Budget surplus
    • Deflationary gap
    • Lower GDP
    • Higher inflation

  3. A current account deficit on the balance of payments occurs when:

    • Tax exceeds spending
    • Exports exceed imports
    • Revenue exceeds debt
    • Imports exceed exports

  4. Economic growth is best measured by an increase in which economic variable?

    • Real GDP
    • National debt
    • Nominal GDP
    • CPI inflation

  5. Why is price stability an important macroeconomic objective for governments?

    • Protects purchasing power
    • Reduces aggregate output
    • Maximises tax revenue
    • Increases interest rates

  6. An economy has nominal GDP of £2,100 billion and a GDP deflator of 105. What is real GDP?

    • £2,000 billion
    • £1,995 billion
    • £2,205 billion
    • £2,105 billion

  7. If CPI inflation rises to 4% against a government target of 2%, which objective is missed?

    • Low unemployment
    • Price stability
    • Economic growth
    • Fiscal balance

  8. Pursuing economic growth through aggregate demand expansion is most likely to worsen which balance?

    • Labour productivity
    • Government budget balance
    • Current account balance
    • Capital stock

  9. Why is it difficult for a government to achieve all macroeconomic objectives simultaneously?

    • Markets always fail
    • Exports equal imports
    • Taxes are fixed
    • Policy objectives conflict

  10. Why is a persistent current account deficit a concern for government policy?

    • Causes domestic deflation
    • Increases income tax
    • Requires foreign borrowing
    • Reduces money supply

  11. Why might real GDP growth fail to raise average living standards for most citizens?

    • Falling price levels
    • Unequal income distribution
    • Lower interest rates
    • Increased export volume

  12. Which policy is most likely to conflict with the government objective of price stability?

    • Expansionary fiscal policy
    • Supply-side policy
    • Contractionary fiscal policy
    • Contractionary monetary policy

  13. Which event is most likely to improve an economy's balance of payments on current account?

    • Increased import demand
    • Increased export competitiveness
    • Appreciation of currency
    • Higher domestic income

  14. Which indicator directly measures progress towards the macroeconomic objective of minimising unemployment?

    • Participation rate
    • Unemployment rate
    • Economic growth rate
    • Dependency ratio

  15. If real GDP grows by 1% against a target of 2.5%, what has occurred?

    • Negative economic growth
    • Growth target shortfall
    • Economic recession
    • Deflationary price spiral

  16. Why do governments pursue multiple macroeconomic objectives simultaneously rather than focusing on just one?

    • Policy trade-offs exist
    • Objectives never conflict
    • Inflation causes growth
    • Taxes fund imports

  17. Why can rapid economic growth cause a deficit on the balance of payments current account?

    • Falling inflation rates
    • Decreased import spending
    • Increased import spending
    • Higher domestic savings

  18. What is the main short-run trade-off when a government accelerates economic growth?

    • Higher unemployment rate
    • Lower import demand
    • Higher inflation rate
    • Increased budget surplus

  19. Which official index is primarily used in the UK to measure price stability?

    • Producer Prices Index
    • Gross Domestic Product
    • Retail Prices Index
    • Consumer Prices Index

  20. Which macroeconomic objective benefits alongside economic growth when supply-side policies increase productive capacity?

    • Higher unemployment
    • Price stability
    • Trade deficit
    • Higher inflation

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