Topic 2 Flashcards
Economic policy and financial regulation
Which of the following is not a European Supervisory Authority (ESA)?
a) European Systemic Risk Board.
b) European Banking Authority.
c) European Insurance and Occupational Pensions Authority.
d) European Securities and Markets Agency.
a) European Systemic Risk Board.
The government takes more in taxation than it spends on public services. This is most likely to result in the economy:
a) contracting.
b) balancing.
c) remaining stable.
d) expanding.
a) contracting.
In normal circumstances, what is the maximum number of times the Bank of England base rate could change in a 12-month period?
a) 3.
b) 5.
c) 8.
d) 12.
c) 8.
A recession is defined as:
a) two quarters of static GDP growth.
b) two quarters of negative GDP growth.
c) three quarters of rising inflation.
d) three quarters of negative GDP growth.
b) two quarters of negative GDP growth.
Which of the following is not a government macroeconomic objective?
a) Price stability.
b) Economic growth.
c) Maximum employment levels.
d) Balance of payments equilibrium.
c) Maximum employment levels.
During the recovery and expansion phase of the economic cycle, share prices are most likely to:
a) neither increase nor fall.
b) increase.
c) fall slightly.
d) collapse.
b) increase.
Which of the following best describes EU Directives?
They:
a) apply only to member states without similar legislation already in place.
b) must be implemented within 12 months of publication.
c) describe the required outcome but leave member states to decide how they are achieved.
d) are automatically binding and member states must implement them exactly as stated in the directive.
c) describe the required outcome but leave member states to decide how they are achieved.
Which of the following is an example of an indirect tax?
a) Income tax.
b) Fuel duty.
c) Capital gains tax.
d) National Insurance.
b) Fuel duty.
Allowing for the maximum permitted divergence, the Monetary Policy Committee inflation target is:
a) 1–2%.
b) 1–3%.
c) 2–3%.
d) 3–4%.
b) 1–3%.
The increase in the Consumer Prices Index has fallen from 4% to 2.5% in the past 12 months. This is an example of:
a) disinflation.
b) negative inflation.
c) deflation.
d) stagflation.
a) disinflation.
Governments use taxation to raise revenue and control money supply.
True or False?
True
The European Union has issued a new regulation. This means that each member state:
a) has the choice whether or not to adopt the regulation.
b) must pass legislation to implement the regulation within two years.
c) is bound by the regulation in its entirety regardless of existing legislation.
d) has the choice of how to adopt the regulation’s objectives.
c) each member state is bound by the regulation in its entirety regardless of existing legislation. Answers A, B, and D relate to directives.
Post-Brexit, which of the following is correct when the EU changes a regulation or introduces new regulation?
a) The UK is legally required to adopt or implement the new or reformed EU regulation.
b) The UK is legally required to ignore the new or reformed EU regulation entirely.
c) The UK should consider whether it adopts a new regulation
or develops its own alternative approach; and, in the case of reformed EU regulation, whether it wishes to amend the
legislation it onshored before Brexit.
c) The UK is not legally required to adopt or ignore a new or reformed piece of EU regulation but has the freedom to consider whether it adopts the regulation or develops its own approach.
All governments aim to achieve zero inflation.
True or false?
False - they aim to keep prices stable, but seeking to reduce inflation to 0 is likely to increase unemployment.
Disinflation means that:
a) prices are rising faster than previously.
b) prices are falling.
c) prices are rising but more slowly than previously.
d) prices are staying the same.
c) prices are rising but more slowly than previously.
