CIMA Exam CIMAPRA17-BA1-1 Topic 3 Question 107 Discussion

Actual exam question for CIMA's CIMAPRA17-BA1-1 exam

Question #: 107
Topic #: 3

[All CIMAPRA17-BA1-1 Questions]

Government X has just increased taxes in order to limit spending and hence demand.

Which of the following is most likely to have been the cause of this fiscal policy?

AAn inflationary gap, where demand outstrips output

BA drop in prices caused by other fiscal policy instruments, e.g. a reduction in business taxes

CThe attainment of full employment within the economy

DThe contraction of the national economy

Show Suggested Answer

Suggested Answer: C, D, E

by France at Feb 10, 2025, 04:15 PM

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Darrin

3 months ago

I'm going with A. Gotta love those inflationary gaps - they're like the black holes of economics, always sucking up our hard-earned cash!

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Cletus

2 months ago

I agree, it's a tough situation for sure.

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Veta

3 months ago

Yeah, it's like a never-ending cycle of trying to balance things out.

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Henriette

3 months ago

I think A makes sense, an inflationary gap would definitely lead to increased taxes.

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Izetta

4 months ago

D is an interesting choice, but increasing taxes during an economic contraction seems counterintuitive. Wouldn't the government want to stimulate the economy instead?

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Jennifer

2 months ago

I think A) An inflationary gap, where demand outstrips output, makes the most sense in this scenario.

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Cherry

3 months ago

C) The attainment of full employment within the economy

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Launa

3 months ago

B) A drop in prices caused by other fiscal policy instruments, e.g. a reduction in business taxes

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Rikki

3 months ago

A) An inflationary gap, where demand outstrips output

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Carolann

4 months ago

B doesn't make much sense to me. Why would the government raise taxes if prices are already dropping due to other policies?

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Emile

4 months ago

I'm not sure, but C seems plausible. If the economy is at full employment, the government might want to cool it down by raising taxes.

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Diane

4 months ago

I think the answer is A. An inflationary gap is a common reason for governments to increase taxes to limit spending and demand.

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Marshall

3 months ago

User 2: Yeah, that makes sense. When demand outstrips output, it can lead to inflationary pressures.

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Xenia

3 months ago

User 1: I think the answer is A. An inflationary gap is a common reason for governments to increase taxes to limit spending and demand.

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Azalee

4 months ago

I think it could be because they want to limit spending and control demand.

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Azzie

4 months ago

I disagree, I believe it was due to the contraction of the national economy.

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Murray

5 months ago

I think the government increased taxes because of an inflationary gap.

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