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Practice mode Monetary, Fiscal And Incomes Policy, And Inflation

Which principle states that as real GNP per head rises, people demand relatively more social goods and relatively fewer private goods?

Correct answer B. Wagner’s law

Explanation

Adolph Wagner observed that public spending grows faster than national income as economies develop, because richer societies demand more public services such as education and welfare.

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Question 03 Monetary, Fiscal And Incomes Policy, And Inflation

Central banks in developing countries (LDCs) generally have less effect on expenditure and output than in developed countries because of: I. an externally dependent banking system; II. a poorly developed securities market; III. a low share of demand deposits in the money supply; IV. investment and employment being relatively insensitive to monetary policy. Which apply?

Correct answer B. All of I, II, III and IV

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Question 04 Monetary, Fiscal And Incomes Policy, And Inflation

Which of the following are costs of inflation: I. it weakens the development of credit and capital markets; II. it distorts business, especially investment, behaviour; III. it raises the price of foreign goods relative to domestic goods; IV. it imposes a tax on holders of money?

Correct answer B. I, II and IV only

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