What this practice covers
These questions are drawn from past CIE 9708 papers and filtered to fiscal policy. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
Start practising Paper 1 MCQs →
What examiners see students get wrong here
These are the errors that cost marks on fiscal policy, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Deficit equals debt. Wrong: “The national debt is this year’s deficit.” Correct: the deficit is a flow; debt is an accumulated stock.
- A smaller deficit means debt is falling. A smaller positive deficit usually means debt is still rising, just more slowly.
- Progressive means richer people pay more money. Progressive means the average tax rate rises with income.
- Marginal tax rate equals average tax rate. The marginal rate applies to additional income. The average rate applies to total income.
- All government payments are direct G. Transfers affect AD indirectly when recipients spend them.
- Expansionary policy always creates large real growth. Near full capacity, much of the effect may appear as a higher price level.
- Capital spending is always beneficial. The effect depends on project quality, timing, capacity constraints and opportunity cost.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Fiscal Policy revision notes.