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CIMA CIMAPRA17-BA1-1 Exam Questions
BA1 - Fundamentals of Business Economics (Page 11 )

Updated On: 16-Feb-2026
Page 11 of 95
PDF with 468 Questions

Which of the following assertions would not be consistent with supply side economics?

  1. Lower taxation increases national income by reducing disincentives to work and invest
  2. High interest rates may reduce investment expenditure and so harm national income growth
  3. Increasing aggregate demand will not affect national income or the price level
  4. Aggregate supply creates its own demand

Answer(s): C



All of the following are elements of a supply side policy except which one?

  1. Reductions in the marginal rates of taxation.
  2. Increased entitlement to social security and unemployment benefits.
  3. Increased public expenditure on education and training.
  4. Privatization of public sector industries.

Answer(s): B



Which of the following statements about supply-side economics is correct?

  1. Supply-side policies are part of aggregate demand management policies.
  2. Fiscal policy cannot be used as a part of supply-side policy
  3. Supply-side economists always reject the use of policy to expand demand
  4. Supply-side policies are used to improve the economy's efficiency and competitiveness

Answer(s): D



A 'supply-side' economist would recommend that in the long term, a country's unemployment problem should be tackled by

  1. A reduction in the money supply
  2. Income tax cuts to promote labor market incentives
  3. Tax cuts to expand aggregate demand
  4. Increasing the job-seekers allowance and the period for which it can be claimed

Answer(s): B



The business sector will be affected by a contraction in the money supply because

  1. Interest rates will tend to fall, thus reducing business costs.
  2. Inflation will fall and thus demand in the economy will expand.
  3. Consumer credit will contract thus reducing consumer demand.
  4. The exchange rate will fall thus making business more internationally competitive.

Answer(s): C






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