O-LevelEconomicsGovernment and the macroeconomy2281/12 · Oct/Nov 2014 · Q161 Mark

A government aims to keep domestic prices stable in a fully employed economy. Which policy should it use?

Aincrease expenditure on defence

Bincrease indirect taxes

Cincrease the rate of interest

Dincrease the wages of government workers

✓ Correct answer

C: increase the rate of interest

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Topic: Government and the macroeconomy, O-Level Economics (syllabus 2281). Multiple choice, 1 mark.
Source: O-Level Economics, Oct/Nov 2014 Paper 1 Variant 2, question 16.

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