【每日一练】ACCA F1（June 2014）

Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question.

The following government policies can be used to expand or slow down the level of economic activity.
1 Taxation
2 Public expenditure
Which of the following combinations of policy would maximise expansion of the economy?
A Increase 1 and increase 2
B Increase 1 and reduce 2
C Reduce 1 and increase 2
D Reduce 1 and reduce 2

Answer：

C

Increasing taxation leaves individuals with less disposable income for expenditure within the economy thereby slowing  economic activity. The same effect is caused by a reduction in government expenditure. Therefore economic activity can be  stimulated by reducing taxation and increasing government expenditure.

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