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A trade-off means gaining more of one objective requires giving up some of another."},{"text":"Giving up one objective prevents changing any of the others.","correct":false,"explanation":"Abandoning an objective is not the definition of a trade-off. A trade-off occurs when gaining more of one objective requires sacrificing some of another."},{"text":"Gaining more of one objective requires measuring all of the others.","correct":false,"explanation":"Measuring objectives helps evaluate policy but does not constitute a trade-off. The term describes gaining more of one objective by giving up some of another."}]},{"id":"fd3443b8-b3c7-4bff-8b59-adb23d8a7a9d","cardType":"basic","points":2,"front":"Why can lower unemployment cause higher inflation?","back":"Demand rises, creating upward pressure on prices.","mcqOptions":[{"text":"Demand rises, creating upward pressure on prices.","correct":true,"explanation":"Lower unemployment raises incomes and spending, while tighter labour markets may increase wages. Stronger aggregate demand therefore creates upward pressure on the general price level."},{"text":"Demand falls, creating upward pressure on prices.","correct":false,"explanation":"This reverses the usual demand-side mechanism, since falling aggregate demand normally reduces inflationary pressure. Lower unemployment can raise demand, putting upward pressure on prices."},{"text":"Supply rises, creating upward pressure on prices.","correct":false,"explanation":"An increase in aggregate supply would normally lower, not raise, the price level. The inflationary pressure comes from demand rising as employment and incomes increase."},{"text":"Demand rises, creating downward pressure on prices.","correct":false,"explanation":"This confuses the effect of stronger demand with that of stronger supply. Rising aggregate demand tends to create upward, rather than downward, pressure on prices."}]},{"id":"f6af5fae-ac38-476f-8724-20013dfb96b7","cardType":"basic","points":2,"front":"Why can faster economic growth worsen the current account?","back":"Imports rise as domestic spending and income increase.","mcqOptions":[{"text":"Imports rise as domestic spending and income increase.","correct":true,"explanation":"Economic growth raises household and business incomes and expenditure, some of which is directed towards foreign goods and services. Higher imports can therefore worsen the current account."},{"text":"Imports fall as domestic spending and income increase.","correct":false,"explanation":"This reverses the usual income effect on imports. As domestic income and expenditure grow, consumers and firms generally purchase more imports, potentially worsening the current account."},{"text":"Exports fall as foreign spending and income increase.","correct":false,"explanation":"Higher foreign income would normally increase demand for a country’s exports rather than reduce it. Faster domestic growth worsens the current account mainly because imports rise."},{"text":"Exports rise as domestic spending and income increase.","correct":false,"explanation":"Domestic income growth directly stimulates spending on imports, not foreign demand for exports. The current account may worsen because rising domestic expenditure causes imports to increase."}]},{"id":"0074da23-4827-49c3-a491-cd61b2a0a929","cardType":"basic","points":3,"front":"What two environmental costs can faster growth create?","back":"

More pollution
Depletion of scarce resources

","mcqOptions":[{"text":"

More pollution
Depletion of scarce resources

","correct":true,"explanation":"Faster growth often increases production, transport and energy use, generating more pollution. It can also accelerate the extraction and depletion of finite natural resources."},{"text":"

Less pollution
Renewal of scarce resources

","correct":false,"explanation":"This wrongly assumes growth automatically improves the environment and renews finite inputs. Faster growth can instead cause more pollution and deplete scarce resources more rapidly."},{"text":"

More employment
Expansion of productive capacity

","correct":false,"explanation":"These are possible economic benefits of growth, not environmental costs. The relevant environmental costs are increased pollution and faster depletion of scarce resources."},{"text":"

Lower taxation
Reduction of public spending

","correct":false,"explanation":"These are fiscal policy changes rather than environmental consequences of growth. Faster output growth can create more pollution and increase the depletion of scarce resources."}]},{"id":"ee5096f2-b139-480a-ab50-96c1b50bf78e","cardType":"basic","points":2,"front":"Why can cutting a fiscal deficit raise unemployment?","back":"Lower government spending or higher taxation reduces aggregate demand.","mcqOptions":[{"text":"Lower government spending or higher taxation reduces aggregate demand.","correct":true,"explanation":"Fiscal contraction reduces injections or household disposable income, lowering aggregate demand. Firms then require fewer workers, so cyclical unemployment may rise."},{"text":"Higher government spending or lower taxation reduces aggregate demand.","correct":false,"explanation":"This reverses the direction of expansionary fiscal policy, which normally raises aggregate demand. Deficit reduction involves lower spending or higher taxation, which reduces demand and employment."},{"text":"Lower government spending or higher taxation increases aggregate demand.","correct":false,"explanation":"This confuses contractionary fiscal policy with expansionary policy. Lower government spending or higher taxation reduces aggregate demand, causing firms to cut output and employment."},{"text":"Higher government spending or lower taxation increases aggregate supply.","correct":false,"explanation":"This describes expansionary measures and misidentifies their main short-run effect as higher aggregate supply. Deficit reduction can raise unemployment by reducing aggregate demand through spending cuts or tax rises."}]},{"id":"6f366f68-38ac-4395-b77b-1f60c3905c5d","cardType":"cloze","points":null,"front":"Finite [ ] means not every macroeconomic objective can be met at once.","back":"Finite productive capacity means not every macroeconomic objective can be met at once.","mcqOptions":[{"text":"productive capacity","correct":true,"explanation":"Productive capacity is finite because an economy has limited factors of production. This scarcity creates constraints and trade-offs between macroeconomic objectives."},{"text":"aggregate demand","correct":false,"explanation":"Aggregate demand is total planned expenditure, not the economy’s fundamental production limit. Finite productive capacity means policymakers cannot achieve every macroeconomic objective simultaneously."},{"text":"money supply","correct":false,"explanation":"Money supply can be influenced by monetary authorities and does not define the economy’s real resource constraint. The relevant limit is finite productive capacity."},{"text":"public expenditure","correct":false,"explanation":"Public expenditure is a component of aggregate demand and a policy choice, rather than the economy’s overall constraint. Finite productive capacity generates conflicts between objectives."}]},{"id":"903f7164-ddd4-4cc7-939b-dbe7b72b1747","cardType":"cloze","points":null,"front":"Finite productive capacity means not every macroeconomic objective can be met at [ ].","back":"Finite productive capacity means not every macroeconomic objective can be met at once.","mcqOptions":[{"text":"once","correct":true,"explanation":"“At once” means simultaneously. Because productive capacity is finite, pursuing one macroeconomic objective can conflict with another, preventing every objective from being achieved together."},{"text":"first","correct":false,"explanation":"“At first” refers only to an initial period and misses the idea of simultaneous policy conflicts. The correct expression is “at once”, meaning all objectives together."},{"text":"present","correct":false,"explanation":"“At present” limits the claim to current circumstances rather than expressing a trade-off between simultaneous objectives. “At once” correctly means all objectives at the same time."},{"text":"different times","correct":false,"explanation":"Objectives may be prioritised and achieved at different times, so this removes the central conflict. Finite capacity means they cannot all be met at once."}]},{"id":"f4258318-d7dd-4cef-9625-57535ab976ce","cardType":"basic","points":1,"front":"What relationship does the short-run Phillips curve show?","back":"An inverse relationship between inflation and unemployment.","mcqOptions":[{"text":"An inverse relationship between inflation and unemployment.","correct":true,"explanation":"The short-run Phillips curve suggests that lower unemployment is associated with higher inflation, while higher unemployment is associated with lower inflation."},{"text":"A direct relationship between inflation and unemployment.","correct":false,"explanation":"This reverses the short-run Phillips curve: inflation and unemployment move in opposite, not the same, directions. It therefore shows an inverse relationship between them."},{"text":"No systematic relationship between inflation and unemployment.","correct":false,"explanation":"This confuses the short-run curve with the absence of a permanent long-run trade-off. In the short run, the Phillips curve shows an inverse relationship."},{"text":"A constant relationship between inflation and unemployment.","correct":false,"explanation":"The Phillips curve does not claim that either variable or their numerical ratio remains constant. It shows an inverse short-run relationship between inflation and unemployment."}]},{"id":"701d3f4b-f1fb-4156-b8f8-1ddd7d8c691c","cardType":"basic","points":1,"front":"What is true of inflation at the natural rate of unemployment?","back":"Inflation is stable because the labour market clears.","mcqOptions":[{"text":"Inflation is stable because the labour market clears.","correct":true,"explanation":"At the natural rate of unemployment, the labour market is in equilibrium, so there is no continuing pressure for wages and prices to accelerate or decelerate."},{"text":"Inflation rises because the labour market clears.","correct":false,"explanation":"A clearing labour market does not create persistent upward pressure on prices. Inflation rises when aggregate demand persistently exceeds productive capacity, not simply because unemployment is at its natural rate."},{"text":"Inflation falls because the labour market clears.","correct":false,"explanation":"Labour-market equilibrium removes neither demand nor supply shocks, but it does not by itself push inflation downward. Stable inflation is associated with the natural rate when the labour market clears."},{"text":"Inflation becomes volatile because the labour market clears.","correct":false,"explanation":"A clearing labour market is consistent with a stable inflation rate rather than automatic volatility. Fluctuations would usually result from changing demand, costs or expectations, not equilibrium employment alone."}]},{"id":"14834b3c-3f3d-412c-8a4b-ddf971b7813a","cardType":"basic","points":2,"front":"What is the likely inflation effect of demand expansion to cut unemployment?","back":"Inflation rises as aggregate demand increases.","mcqOptions":[{"text":"Inflation rises as aggregate demand increases.","correct":true,"explanation":"Demand expansion increases aggregate demand, raising output and employment in the short run but also creating upward pressure on the general price level."},{"text":"Inflation falls as aggregate demand increases.","correct":false,"explanation":"This reverses the usual demand-side relationship: stronger aggregate demand tends to increase price pressure. Falling inflation would more commonly follow weaker demand or lower production costs."},{"text":"Inflation remains unchanged as aggregate demand increases.","correct":false,"explanation":"Assuming spare capacity is not unlimited, increased aggregate demand raises firms’ costs and prices as the economy approaches capacity. Therefore, inflation generally increases rather than staying unchanged."},{"text":"Inflation becomes zero as aggregate demand increases.","correct":false,"explanation":"Expanding demand does not eliminate inflation; it normally adds to price pressure, especially near full capacity. Zero inflation would require no net increase in the general price level."}]},{"id":"55216b8c-6521-4ab8-8e1c-f801017ddbc3","cardType":"basic","points":2,"front":"What is the long-run Phillips curve's shape and position?","back":"It is vertical at the natural rate of unemployment.","mcqOptions":[{"text":"It is vertical at the natural rate of unemployment.","correct":true,"explanation":"In the long run, unemployment returns to its natural rate regardless of the inflation rate, so the long-run Phillips curve is vertical at that unemployment level."},{"text":"It is horizontal at the natural rate of unemployment.","correct":false,"explanation":"A horizontal curve would imply that unemployment could vary without changing inflation. In the long run, expectations adjust and unemployment returns to its natural rate, producing a vertical curve."},{"text":"It is downward sloping at the natural rate of unemployment.","correct":false,"explanation":"The short-run Phillips curve may slope downward, but this trade-off does not persist after inflation expectations adjust. The long-run relationship is vertical at the natural rate."},{"text":"It is upward sloping at the natural rate of unemployment.","correct":false,"explanation":"An upward slope would suggest that higher inflation is associated with higher unemployment in the long run. Instead, inflation does not permanently alter the natural rate, so the curve is vertical."}]},{"id":"e5bc8098-af33-4057-a462-987545f1913f","cardType":"basic","points":2,"front":"Which policy type can lower unemployment in the long run?","back":"Supply-side reform, because demand policy cannot lower unemployment permanently.","mcqOptions":[{"text":"Supply-side reform, because demand policy cannot lower unemployment permanently.","correct":true,"explanation":"Supply-side reforms can improve labour-market flexibility, skills, incentives and productive capacity, reducing the natural rate of unemployment in the long run."},{"text":"Demand expansion, because demand policy lowers unemployment permanently.","correct":false,"explanation":"Demand expansion can reduce unemployment temporarily, but workers’ inflation expectations eventually adjust and unemployment returns to its natural rate. It therefore cannot permanently lower unemployment."},{"text":"Deflationary policy, because lower prices create permanent jobs.","correct":false,"explanation":"Reducing demand may lower inflation but also risks lower output and employment in the short run. It does not improve the structural features determining the natural rate."},{"text":"Exchange-rate appreciation, because imports create permanent employment.","correct":false,"explanation":"An appreciation makes imports cheaper but can reduce export competitiveness and aggregate demand. It does not directly reform skills, incentives or labour-market structures that determine long-run unemployment."}]},{"id":"ef1029d0-e9dc-4144-bddd-3bcf3e7233b9","cardType":"cloze","points":null,"front":"Supply-side policy can raise [ ], loosening trade-offs in the long run.","back":"Supply-side policy can raise potential output, loosening trade-offs in the long run.","mcqOptions":[{"text":"potential output","correct":true,"explanation":"Supply-side policies improve the economy’s productive capacity, allowing potential output to increase. This shifts long-run aggregate supply outward and can reduce inflationary pressure at a given demand level."},{"text":"nominal output","correct":false,"explanation":"Supply-side policy primarily increases the economy’s capacity to produce goods and services, rather than merely raising their money value. The relevant concept is potential output."},{"text":"consumer confidence","correct":false,"explanation":"Consumer confidence can influence aggregate demand, but it is not the direct productive-capacity outcome identified here. Supply-side policy raises potential output in the long run."},{"text":"the price level","correct":false,"explanation":"Some supply-side reforms may reduce cost pressures and prices, but their key long-run effect is increasing productive capacity. The blank requires the economy’s potential output."}]},{"id":"f69db06a-78e6-4a79-853a-bc53cd482579","cardType":"cloze","points":null,"front":"Supply-side policy can raise potential output, loosening trade-offs in the [ ].","back":"Supply-side policy can raise potential output, loosening trade-offs in the long run.","mcqOptions":[{"text":"long run","correct":true,"explanation":"Supply-side reforms affect productive capacity gradually, so their main benefit is a larger potential output and a weaker inflation-unemployment trade-off over the long run."},{"text":"short run","correct":false,"explanation":"The short run is when demand changes can temporarily affect unemployment and output. Supply-side reforms generally require time to alter productive capacity, so the relevant period is the long run."},{"text":"business cycle","correct":false,"explanation":"The business cycle describes fluctuations in economic activity, not the time horizon over which reforms increase productive capacity. The trade-off is loosened over the long run."},{"text":"recession","correct":false,"explanation":"A recession is a period of falling or weak economic activity, not a time horizon for evaluating structural policy effects. Supply-side reforms loosen trade-offs over the long run."}]},{"id":"ce2f67f0-bbd1-481c-a111-6a03d0bb4bdf","cardType":"basic","points":3,"front":"What three delays make up policy time lags?","back":"Recognition, decision and implementation delays.","mcqOptions":[{"text":"Recognition, decision and implementation delays.","correct":true,"explanation":"Recognition delay identifies the problem, decision delay covers choosing a policy, and implementation delay is the time before that policy takes effect in the economy."},{"text":"Measurement, forecasting and evaluation delays.","correct":false,"explanation":"These activities may occur during policymaking, but they are not the standard three policy time lags. The recognised sequence is recognition, decision and implementation delays."},{"text":"Demand, supply and price delays.","correct":false,"explanation":"These are economic variables or mechanisms rather than stages in the policy process. Policy time lags refer to recognition, decision and implementation delays."},{"text":"Short-run, medium-run and long-run delays.","correct":false,"explanation":"These describe broad time horizons, not the distinct stages causing policy delays. The three specific lags are recognition, decision and implementation."}]},{"id":"770f99ea-1204-41f9-9adc-79bb2bb25496","cardType":"basic","points":2,"front":"How can a delayed stimulus become pro-cyclical?","back":"It may arrive after recovery begins, becoming pro-cyclical.","mcqOptions":[{"text":"It may arrive after recovery begins, becoming pro-cyclical.","correct":true,"explanation":"If stimulus is introduced after the downturn has ended, it reinforces the upswing rather than offsetting the original weakness, making policy pro-cyclical."},{"text":"It may arrive before recovery begins, becoming counter-cyclical.","correct":false,"explanation":"Stimulus that arrives before recovery and supports weak demand would generally be counter-cyclical. The pro-cyclical problem occurs when delays make it arrive during the recovery."},{"text":"It may arrive during recession, becoming contractionary.","correct":false,"explanation":"Stimulus delivered during recession would support aggregate demand rather than contract it. A delayed stimulus becomes pro-cyclical when it arrives after recovery has already started."},{"text":"It may arrive after recovery begins, becoming counter-cyclical.","correct":false,"explanation":"Once recovery is under way, additional stimulus strengthens the existing upswing instead of opposing it. That alignment with the cycle makes the policy pro-cyclical, not counter-cyclical."}]},{"id":"85a2b907-a878-4dc0-b580-5a406780af77","cardType":"basic","points":2,"front":"Why do inaccurate forecasts and poor data hinder policy?","back":"They give an uncertain, out-of-date picture of the economy.","mcqOptions":[{"text":"They give an uncertain, out-of-date picture of the economy.","correct":true,"explanation":"Policy decisions depend on forecasts and current data. If these are inaccurate or outdated, policymakers cannot reliably judge economic conditions or predict the likely effects of intervention."},{"text":"They give a certain, up-to-date picture of the economy.","correct":false,"explanation":"Accurate and current information would assist rather than hinder policymaking. Poor data create an uncertain, out-of-date picture, increasing the risk that policies are mistimed or inappropriate."},{"text":"They give an accurate, long-term picture of the economy.","correct":false,"explanation":"The temptation is to assume forecasts provide dependable long-term information, but inaccurate forecasts and poor data instead give an uncertain, out-of-date picture of current economic conditions."},{"text":"They give a stable, comprehensive picture of the economy.","correct":false,"explanation":"Poor data cannot provide a stable, comprehensive assessment of economic activity. They produce an uncertain, out-of-date picture, making suitable policy choices and accurate impact predictions more difficult."}]},{"id":"fdc151fc-7d37-496a-906c-24fb09809bd4","cardType":"basic","points":1,"front":"What feature of GDP data can make policymaking difficult?","back":"GDP figures are revised long after initial publication.","mcqOptions":[{"text":"GDP figures are revised long after initial publication.","correct":true,"explanation":"Initial GDP estimates are based on incomplete information and may later be revised. Policymakers must therefore act before knowing the economy’s growth performance with certainty."},{"text":"GDP figures are finalised before initial publication.","correct":false,"explanation":"Initial GDP figures are estimates rather than final measurements. They are often revised long after publication, so decisions based on the original figures may prove poorly targeted."},{"text":"GDP figures are forecast long before initial publication.","correct":false,"explanation":"Although GDP forecasts exist, the specific data problem is that published GDP estimates are revised later. These revisions can substantially alter policymakers’ understanding of previous economic performance."},{"text":"GDP figures are indexed immediately after initial publication.","correct":false,"explanation":"Indexing is not the relevant source of policymaking difficulty. GDP figures are revised long after initial publication as more complete data become available, creating uncertainty about current conditions."}]},{"id":"0770ebd2-0371-4eb1-b814-41c6c9e28457","cardType":"basic","points":1,"front":"Why is the effect of a policy on private-sector behaviour uncertain?","back":"Households' and firms' responses are hard to predict.","mcqOptions":[{"text":"Households' and firms' responses are hard to predict.","correct":true,"explanation":"Private-sector reactions depend on confidence, expectations and individual circumstances. Consequently, policymakers cannot know precisely how households and firms will change spending, saving or investment."},{"text":"Households' and firms' responses are fixed by regulation.","correct":false,"explanation":"Regulation does not determine every private-sector response to policy. Households' and firms' behaviour remains hard to predict because confidence, expectations and incentives affect their decisions."},{"text":"Households' and firms' responses are identical over time.","correct":false,"explanation":"Responses can change as expectations, confidence and economic circumstances change. Households' and firms' reactions are therefore hard to predict rather than remaining identical over time."},{"text":"Households' and firms' responses are known in advance.","correct":false,"explanation":"Policymakers cannot know private-sector behaviour in advance with certainty. Households' and firms' responses are hard to predict because people react differently to changing incentives and expectations."}]},{"id":"1517c379-409e-411e-8185-e5bcb4de8723","cardType":"cloze","points":null,"front":"Very low [ ] leave little scope for further monetary easing.","back":"Very low interest rates leave little scope for further monetary easing.","mcqOptions":[{"text":"interest rates","correct":true,"explanation":"When interest rates are already very low, a central bank has little room to reduce them further to encourage borrowing, consumption and investment."},{"text":"income tax rates","correct":false,"explanation":"Low income tax rates may constrain further fiscal tax cuts, not monetary easing. Very low interest rates leave central banks little room to stimulate demand through additional rate reductions."},{"text":"exchange rates","correct":false,"explanation":"A low exchange rate does not directly measure the remaining scope for conventional monetary easing. Very low interest rates limit how much further the central bank can cut rates."},{"text":"inflation rates","correct":false,"explanation":"Low inflation may influence the need for monetary easing, but it is very low interest rates that restrict its scope because rates cannot readily be reduced much further."}]},{"id":"8d698101-edc1-4719-89bd-54b66f1aa79b","cardType":"cloze","points":null,"front":"Very low interest rates leave little scope for further [ ].","back":"Very low interest rates leave little scope for further monetary easing.","mcqOptions":[{"text":"monetary easing","correct":true,"explanation":"Monetary easing commonly involves lowering interest rates to stimulate aggregate demand. When rates are already very low, the central bank has limited scope to make further reductions."},{"text":"fiscal tightening","correct":false,"explanation":"Fiscal tightening concerns government spending and taxation, so its scope is not directly restricted by low interest rates. Low rates primarily limit further monetary easing through conventional rate cuts."},{"text":"currency appreciation","correct":false,"explanation":"Currency appreciation is not the policy action directly constrained by interest rates approaching their lower bound. Very low rates leave little scope for further monetary easing through rate reductions."},{"text":"supply-side reform","correct":false,"explanation":"Supply-side reforms change productive capacity and incentives rather than relying on interest-rate cuts. Very low rates specifically reduce the scope for further monetary easing by the central bank."}]},{"id":"01e77ef6-ef1e-48f3-a53a-3ec9653e26f8","cardType":"basic","points":1,"front":"How do high government debt and a high fiscal deficit constrain policy?","back":"They limit scope for further fiscal support.","mcqOptions":[{"text":"They limit scope for further fiscal support.","correct":true,"explanation":"High debt and persistent deficits make additional borrowing more costly or risky. This reduces the government’s ability to cut taxes or increase spending to support demand."},{"text":"They limit scope for further monetary easing.","correct":false,"explanation":"This confuses fiscal constraints with monetary constraints. High government debt and a high deficit directly limit further fiscal support, while monetary easing is primarily controlled by the central bank."},{"text":"They limit scope for further currency depreciation.","correct":false,"explanation":"Debt and deficits may affect exchange-rate expectations, but they do not directly determine the scope for depreciation. Their main constraint is on further fiscal support financed through borrowing."},{"text":"They limit scope for further trade liberalisation.","correct":false,"explanation":"Trade liberalisation concerns reducing barriers to international trade and is not directly restricted by government borrowing. High debt and deficits chiefly limit the scope for further fiscal support."}]},{"id":"899248ad-6f6e-4bd5-b65a-55cf43744c03","cardType":"basic","points":2,"front":"How can transfer pricing constrain a government?","back":"They can shift profits to low-tax countries, reducing tax revenue.","mcqOptions":[{"text":"They can shift profits to low-tax countries, reducing tax revenue.","correct":true,"explanation":"Transfer pricing can allocate a transnational corporation’s profits to jurisdictions with lower tax rates. This reduces taxable profits and government tax receipts in the domestic economy."},{"text":"They can shift profits to high-tax countries, reducing tax revenue.","correct":false,"explanation":"Profit shifting is generally directed towards low-tax, not high-tax, jurisdictions to reduce the corporation’s total tax liability. This lowers the domestic government’s tax revenue."},{"text":"They can shift workers to low-wage countries, reducing tax revenue.","correct":false,"explanation":"Moving workers or production abroad is relocation, not transfer pricing. Transfer pricing constrains governments by shifting reported profits to low-tax countries, thereby reducing domestic tax revenue."},{"text":"They can shift imports to tariff-free countries, reducing tax revenue.","correct":false,"explanation":"Redirecting imports to avoid tariffs is not the central mechanism of transfer pricing. Transfer pricing shifts reported profits to low-tax countries, reducing the government’s corporation tax receipts."}]},{"id":"43d9be09-e365-4de1-a165-3645f3670201","cardType":"basic","points":2,"front":"How can the relocation threat from transnational corporations weaken domestic policy?","back":"Relocation may force governments to soften taxes or regulation.","mcqOptions":[{"text":"Relocation may force governments to soften taxes or regulation.","correct":true,"explanation":"A transnational corporation may threaten to move investment and employment abroad. To prevent this, governments may reduce business taxes or weaken regulations they would otherwise impose."},{"text":"Nationalisation may force governments to soften taxes or regulation.","correct":false,"explanation":"Nationalisation transfers private assets into state ownership and is not the threat used by transnational corporations. The possibility of relocation can pressure governments to soften taxes or regulation."},{"text":"Protectionism may force governments to soften taxes or regulation.","correct":false,"explanation":"Protectionism involves barriers such as tariffs and quotas rather than moving a corporation’s operations. A relocation threat weakens policy by pressuring governments to reduce taxes or regulation."},{"text":"Privatisation may force governments to soften taxes or regulation.","correct":false,"explanation":"Privatisation transfers state-owned organisations to private ownership and does not describe a corporation’s threat. Relocation may pressure governments to soften taxes or regulation to retain investment and jobs."}]},{"id":"d105ef6d-2957-4b6b-9a5c-2cdc3030407f","cardType":"basic","points":2,"front":"How do automatic stabilisers affect economic fluctuations?","back":"They dampen the economic cycle without a new government decision.","mcqOptions":[{"text":"They dampen the economic cycle without a new government decision.","correct":true,"explanation":"Tax receipts fall and welfare payments rise automatically during downturns, supporting disposable income and demand. The reverse occurs during expansions, so fluctuations are moderated without discretionary action."},{"text":"They amplify the economic cycle without a new government decision.","correct":false,"explanation":"This reverses the stabilising effect. Automatic changes in taxes and benefits support demand during downturns and restrain it during expansions, thereby dampening rather than amplifying the economic cycle."},{"text":"They eliminate the economic cycle without a new government decision.","correct":false,"explanation":"Automatic stabilisers reduce fluctuations but are not powerful enough to remove them completely. They dampen the economic cycle through automatic changes in tax receipts and welfare spending."},{"text":"They control the economic cycle through a new government decision.","correct":false,"explanation":"This confuses automatic stabilisers with discretionary fiscal policy. They dampen the economic cycle without a new government decision because tax receipts and welfare payments change automatically."}]},{"id":"7ff654d7-e9ad-4021-a5b7-fc9f3ee9f34a","cardType":"basic","points":1,"front":"A £60bn deficit with £2,000bn GDP equals what percentage of GDP?","back":"3% of GDP.","mcqOptions":[{"text":"3% of GDP.","correct":true,"explanation":"Dividing the £60bn deficit by £2,000bn GDP and multiplying by 100 gives $\\frac{60}{2000}\\times100=3\\%$, so the deficit is 3% of GDP."},{"text":"0.3% of GDP.","correct":false,"explanation":"This results from moving the decimal point one place too far when converting the ratio to a percentage. $\\frac{60}{2000}\\times100=3\\%$, not 0.3%."},{"text":"30% of GDP.","correct":false,"explanation":"This makes the deficit share ten times too large through an incorrect percentage conversion. Dividing 60 by 2,000 and multiplying by 100 gives 3% of GDP."},{"text":"12% of GDP.","correct":false,"explanation":"This does not follow from dividing the deficit by GDP and likely uses the wrong denominator. The correct calculation is $\\frac{60}{2000}\\times100=3\\%$ of GDP."}]}]}],"examCountdown":null,"heading":"10.3.2 problems and conflicts arising from the outcome of these policies","title":"10.3.2 problems and conflicts arising from the outcome of these policies Flashcards","topbar":{"backHref":"/international-a-level/economics/cie/flashcards"},"topicSidebar":"$L90"}]}],"topicId":"29c360d6-7f2a-4339-a471-ca21ea11b257","walled":"$L91"}],"$L92","$L93"]