4.5 Role of the state in the macroeconomy

Question 1

a) Distinction between capital expenditure, current
expenditure and transfer payments

Question 2

b) Reasons for the changing size and composition of public
expenditure in a global context

Question 3

c) The significance of differing levels of public expenditure
as a proportion of GDP on:
o productivity and growth
o living standards
o crowding out
o level of taxation
o equality

Question 4

a) Distinction between progressive, proportional and
regressive taxes

Question 5

b) The economic effects of changes in direct and indirect
tax rates on other variables:
o incentives to work
o tax revenues: the Laffer curve
o income distribution
o real output and employment
o the price level
o the trade balance
o FDI flows

Question 6

a) Distinction between automatic stabilisers and
discretionary fiscal policy

Question 7

b) Distinction between a fiscal deficit and the national debt

Question 8

c) Distinction between structural and cyclical deficits

Question 9

d) Factors influencing the size of fiscal deficits

Question 10

d) Factors influencing the size of fiscal deficits

Question 11

e) Factors influencing the size of national debts

Question 12

f) The significance of the size of fiscal deficits and national
debts

Question 13

a) Use of fiscal policy, monetary policy, exchange rate
policy, supply-side policies and direct controls in
different countries, with specific reference to the impact
of:
o measures to reduce fiscal deficits and national debts
o measures to reduce poverty and inequality
o changes in interest rates and the supply of money
o measures to increase international competitiveness

Question 14

b) Use and impact of macroeconomic policies to respond to
external shocks to the global economy

Question 15

c) Measures to control global companies’ (transnationals’)
operations:
o the regulation of transfer pricing
o limits to government ability to control global
companies

Question 16

d) Problems facing policymakers when applying policies:
o inaccurate information
o risks and uncertainties
o inability to control external shocks