Govt Intervention to Protect the Environment

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Questions and Answers

What is a consequence of business activities on the environment?

No impact on standards of living

Increase in employment opportunities

Improvement in standards of living

Reduction in standards of living (correct)

What type of pollution is caused by loud music and machines?

Air Pollution

Water Pollution

Visual Pollution

Noise Pollution (correct)

What is the aim of taxation in relation to environmental protection?

To increase business profits

To increase employment opportunities

To reduce government revenue

To ensure that those who cause social costs meet them (correct)

What is an example of a business activity that damages the environment?

Power generation using fossil fuels Signup and view all the answers

What is a method used by the government to protect the environment?

Taxation to ensure firms meet social costs Signup and view all the answers

What is a type of pollution caused by refineries and chemical processing plants?

Hazardous Air Pollutants (HAPs) and Volatile Organic Compounds (VOCs) Signup and view all the answers

Why are fines imposed on firms that damage the environment?

To incentivise firms to reduce pollution Signup and view all the answers

What is the purpose of regulation in relation to environmental protection?

To protect the environment through legislation Signup and view all the answers

What is free trade, according to the text?

A situation in which the goods coming into or going out of a country are not controlled or taxed Signup and view all the answers

What is one of the advantages of free trade, according to the text?

Lower prices and increased choice for consumers Signup and view all the answers

Why do countries benefit from specializing in the production of goods?

Because they are more efficient in producing those goods Signup and view all the answers

What is the result of international trade on living standards and output?

It raises living standards and output Signup and view all the answers

What happens to the global economy when countries specialize in producing goods?

It becomes more efficient Signup and view all the answers

What is one of the reasons why consumers benefit from free trade?

Because they can buy goods more cheaply Signup and view all the answers

What is a reason why international trade benefits the world?

Because it helps to raise living standards and income Signup and view all the answers

What is a result of lower input prices for producers?

Increased output and income Signup and view all the answers

What is the primary role of central banks in implementing monetary policy?

Regulating the banking system and implementing monetary policy Signup and view all the answers

What is the effect of higher interest rates on aggregate demand in the economy?

It reduces aggregate demand Signup and view all the answers

What is the primary goal of monetary policy in relation to inflation?

To reduce inflation Signup and view all the answers

What is the effect of higher interest rates on the money supply?

It reduces the growth of the money supply Signup and view all the answers

What is the role of central banks in stabilizing a nation's currency?

Stabilizing the exchange rate Signup and view all the answers

What is the relationship between interest rates and unemployment?

Higher interest rates lead to higher unemployment Signup and view all the answers

What is the primary effect of government spending, taxation, and borrowing on the economy?

It affects aggregate demand Signup and view all the answers

Which type of tax is levied on the income earned by firms and individuals?

Direct tax Signup and view all the answers

What is the term for a government's revenue exceeding its expenditure in a year?

Fiscal surplus Signup and view all the answers

What is the purpose of expansionary fiscal policy?

To stimulate aggregate demand Signup and view all the answers

Which of the following is an example of an environmental tax?

Landfill tax Signup and view all the answers

What is the term for a government's fiscal measures aimed at reducing aggregate demand in the economy?

Contractionary fiscal policy Signup and view all the answers

Which of the following is an indirect tax?

Aggregates levy Signup and view all the answers

What is a potential use of a fiscal surplus?

To pay off national debt Signup and view all the answers

What happens to the demand for a specific currency when speculators buy it?

It increases Signup and view all the answers

What is the outcome when firms that sell goods and services to foreigners expect to be paid in their own currency?

Demand for exports rises Signup and view all the answers

What happens to the exchange rates when demand for exports rises?

They are driven up Signup and view all the answers

What do speculators do when they believe a currency will fall?

They sell the currency Signup and view all the answers

What is the result of increased demand for imports?

Increased supply of domestic currency Signup and view all the answers

What determines the exchange rate?

The equilibrium where supply and demand for pounds are equal Signup and view all the answers

What happens to the exchange rates when speculators sell a currency they believe will fall?

They decrease Signup and view all the answers

What is the result of firms selling goods and services to foreigners?

Increased demand for foreign currency Signup and view all the answers

Study Notes

Government Intervention to Protect the Environment

Ways businesses damage the environment: visual pollution, mining, power generation, chemical processing, agriculture
Methods of government intervention:
- Taxation: ensuring those who cause social costs meet them
- Subsidies: incentives to reduce activities that damage the environment
- Regulation: legislation, guidelines, and codes of practice to protect the environment
- Fines: financial penalties to encourage responsible behavior

Fiscal Policy

Direct taxes: levied on firms and individuals
Types of taxes:
- Income tax
- Corporation tax
- Capital gains tax
- Inheritance tax
Fiscal policy measures:
- Expansionary: stimulating aggregate demand
- Contractionary: reducing aggregate demand
Fiscal surplus: excess government revenue over spending

Monetary Policy

Role of central banks: implementing monetary policy and regulating the banking system
Tools of monetary policy:
- Interest rates: controlling the money supply and aggregate demand
- Money supply: amount of money circulating in the economy
Impact of interest rate changes:
- Inflation: higher interest rates reduce borrowing and money supply growth
- Unemployment: higher interest rates reduce aggregate demand and employment

International Trade

Free trade: situation where goods are not controlled or taxed
Benefits of free trade:
- Lower prices and increased choice for consumers
- Lower input prices through specialization
- Increased efficiency and output
Reasons for international trade:
- Markets: foreign currency exchange
- Demand for exports: foreign currency demand increases exchange rates
- Demand for imports: foreign currency demand increases supply
Exchange rates determination:
- Equilibrium exchange rate: where supply and demand for currency are equal

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Description

This quiz assesses your understanding of government intervention in protecting the environment, including ways businesses damage the environment and measures to mitigate harm.