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Complete_Economics_Compilation

The document contains a compilation of comprehensive economics questions and answers covering microeconomics, macroeconomics, fiscal and monetary policy, and employment. Key topics include the effects of bank lending on economic growth, the costs of long-term unemployment, the impact of government spending on poverty, and the relationship between unemployment and tax revenue. It also discusses the implications of inflation versus deflation, as well as the effects of tax changes during economic downturns.

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Ali Amir
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0 views

Complete_Economics_Compilation

The document contains a compilation of comprehensive economics questions and answers covering microeconomics, macroeconomics, fiscal and monetary policy, and employment. Key topics include the effects of bank lending on economic growth, the costs of long-term unemployment, the impact of government spending on poverty, and the relationship between unemployment and tax revenue. It also discusses the implications of inflation versus deflation, as well as the effects of tax changes during economic downturns.

Uploaded by

Ali Amir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Comprehensive Economics Questions & Answers Compilation

1. Microeconomics

Q: Analyze how an increase in bank lending can increase economic growth. (6 marks)

A: Increased bank lending encourages business expansion, boosts consumer spending, creates
jobs, fosters innovation, and improves government revenue, all of which contribute to economic
growth.

Q: Explain two costs of long-term unemployment to those who are unemployed. (4 marks)

A: 1. Loss of income, leading to financial struggles.


2. Skills deterioration, making it harder to find a job in the future.

2. Macroeconomics

Q: Discuss whether increasing government spending will reduce poverty. (8 marks)

A: Increased government spending can create jobs, provide welfare support, and improve access to
essential services. However, inefficiencies, debt burdens, and dependency risks can limit its
effectiveness.

Q: Analyze how a fall in unemployment can increase tax revenue. (6 marks)

A: Lower unemployment leads to higher income tax revenue, increased consumer spending (raising
VAT), higher corporate tax revenue, reduced government welfare spending, and higher property tax
collections.

Q: Discuss whether inflation is worse than deflation. (8 marks)

A: Inflation reduces purchasing power and creates uncertainty, while deflation leads to falling
demand, rising debt burdens, and unemployment. Controlled inflation is preferable to deflation, but
excessive inflation or deflation is harmful.

Q: Discuss whether a cut in the rate of interest would end deflation. (8 marks)

A: Lower interest rates encourage borrowing and spending, boost business investment, and
increase asset prices. However, low confidence, already low interest rates, or structural issues can
limit their effectiveness.

3. Fiscal and Monetary Policy


Q: Discuss whether a government should increase tax rates during a recession. (8 marks)

A: Higher taxes reduce disposable income and demand, worsening the recession. However, they
may help reduce budget deficits and fund public services.

Q: Discuss whether a decrease in income tax would reduce deflation. (8 marks)

A: Lower income taxes increase disposable income and spending, which can help reduce deflation.
However, if confidence is low, people may save instead of spending, limiting its effect.

4. Employment and Unemployment

Q: Analyze how the effects of an increase in unemployment impact inflation. (6 marks)

A: Higher unemployment reduces consumer spending, lowering demand-pull inflation. However,


businesses facing lower demand and profits may cut production, leading to cost-push inflation in the
long run.

End of Document

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