Lesson 4.2.5.1

4.2.5.1 Fiscal policy Quiz: AQA Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.2.5.1, Fiscal 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 manipulated by the government when conducting fiscal policy?

    • Interest rates
    • Government taxation
    • Money supply
    • Exchange rates

  2. What happens to the average rate of a progressive tax as individual income increases?

    • It becomes zero
    • It falls
    • It rises
    • It remains constant

  3. What happens to the average rate of a regressive tax as income increases?

    • It turns negative
    • It falls
    • It rises
    • It remains constant

  4. Which type of tax is paid directly on income or profits?

    • Regressive tax
    • Ad valorem tax
    • Indirect tax
    • Direct tax

  5. What occurs when annual government spending is greater than total tax revenue?

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

  6. What term describes the total accumulated stock of all outstanding government borrowing?

    • Current account deficit
    • Trade deficit
    • Budget deficit
    • National debt

  7. What is the main function of the UK Office for Budget Responsibility?

    • Setting interest rates
    • Independent fiscal forecasting
    • Managing bank reserves
    • Collecting tax revenues

  8. If spending is £800 billion and revenue is £750 billion, what is the budget balance?

    • £1,550 billion surplus
    • £1,550 billion deficit
    • £50 billion deficit
    • £50 billion surplus

  9. Income tax is 20% on the first £10,000 and 40% on earnings above £10,000. Calculate tax on £30,000.

    • £6,000
    • £10,000
    • £12,000
    • £8,000

  10. Which income group pays a higher percentage of their income on VAT?

    • High net-worth individuals
    • Lower income earners
    • Higher income earners
    • Middle income earners

  11. Which type of budget deficit increases automatically during an economic recession?

    • Structural deficit
    • Trade deficit
    • Cyclical deficit
    • Capital deficit

  12. What term describes a budget deficit that persists even when at full employment?

    • Cyclical deficit
    • Seasonal deficit
    • Structural deficit
    • Frictional deficit

  13. What is the primary short-run macroeconomic result of a government tax cut?

    • Higher interest rates
    • Lower aggregate demand
    • Lower total spending
    • Higher aggregate demand

  14. When assessing whether national debt is manageable, which measure is most relevant?

    • Exchange rate balance
    • Inflation rate
    • Debt-to-GDP ratio
    • Unemployment level

  15. What is the main macroeconomic risk of fiscal consolidation during a recession?

    • Increased economic growth
    • Higher inflation rates
    • Higher exchange rates
    • Reduced aggregate demand

  16. National debt is 2000 billion pounds and nominal GDP is 2500 billion pounds. What is the debt-to-GDP ratio?

    • 80 per cent
    • 20 per cent
    • 50 per cent
    • 125 per cent

  17. How does running a budget surplus affect the circular flow of income?

    • Net injection
    • Zero leakage
    • Balanced flow
    • Net withdrawal

  18. What type of tax takes a higher percentage of income as income rises?

    • Regressive tax
    • Indirect tax
    • Progressive tax
    • Proportional tax

  19. Which principle of taxation states that taxes should be based on ability to pay?

    • Certainty
    • Equity
    • Efficiency
    • Convenience

  20. How does increased government spending on infrastructure affect long-run aggregate supply?

    • Shifts LRAS left
    • Shifts AD left
    • Unchanged LRAS
    • Shifts LRAS right

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