“c01ThinkingLikeAnEconomist_PrintPDF” — 2022/7/18 — 23:09 — page 67 — #65
Question 19 In a mixed economy represented by the three-sector circular flow model, stabilising economic activity is an important government function. Regarding this role, which statement is most correct?
FS
A. In a recession, the government needs to use policies to slow household consumption spending to avoid inflation. B. In a strong recovery, the government should cut taxes and lift its spending. C. In a boom, the government should raise taxes. D. Countercyclical policies mean that as economic activity slows, governments need to cut their spending.
O
Question 20
PR
O
In a mixed economy, the government redistributes incomes using various policies. Regarding this role, which statement is incorrect?
PA
G
E
A. In the absence of government intervention, the market would not provide incomes to those who are too old to work. B. For maximum effectiveness, the rich are normally excluded from receiving welfare benefits. C. Progressive taxes are those where the tax rate varies inversely with income. D. Because access to education and health are regarded as necessities and they are expensive to produce, they cannot be sold cheaply by the private sector, necessitating provision by the public sector.
Resources
Resourceseses
TE
D
Digital documents Multiple choice answer grid (doc-37952) Multiple choice answers (doc-37953)
1.9 Section B: Extended response questions
CO RR EC
Question 1 (6 marks)
The nature of economics as a study
a. Explain the differences between the study of microeconomics and macroeconomics, giving two examples for each. (2 marks) b. Outline the difference between positive economics and normative economics. (2 marks) c. Identify the type of statement (positive or normative) that each of the following represents: i. Lower interest rates charged on individuals borrowing bank credit will tend to push up house prices. (1 mark) ii. The unemployment benefit is too low and should be raised by $70 per week. (1 mark)
U
N
Question 2 (6 marks)
Choice and opportunity cost In 1969, the USA successfully managed to put a man on the moon. The money cost of the project for the government and nation (in today’s dollars) was estimated to be around US$160 billion:
a. Define the term opportunity cost. (1 mark) b. Identify and explain the realistic opportunity costs of this space program (giving likely examples of opportunity costs in your answer). (3 marks) c. Outline the potential benefits of the US government’s decision to put a man on the moon. (2 marks)
TOPIC 1 Thinking like an economist
67
