#1
What is the primary objective of a government budget?
Allocate resources efficiently
ExplanationEfficient allocation of resources to meet public needs and goals.
#2
What is the primary source of revenue for the government in a budget?
Taxation
ExplanationTaxation is the primary income source for government budgets.
#3
Which fiscal policy tool involves changing the money supply to influence economic activity?
Monetary policy
ExplanationMonetary policy adjusts the money supply to impact economic activity.
#4
Which type of fiscal policy aims to increase aggregate demand during economic downturns?
Expansionary fiscal policy
ExplanationExpansionary fiscal policy seeks to boost aggregate demand during economic downturns.
#5
Which of the following is a part of the capital budget?
Infrastructure development
ExplanationCapital budget includes investments in long-term assets like infrastructure.
#6
What is the term used to describe a situation where government spending exceeds revenue?
Deficit
ExplanationDeficit occurs when government spending surpasses its revenue.
#7
Which of the following is an example of capital expenditure in the government budget?
Building a new highway
ExplanationConstructing infrastructure like highways constitutes capital expenditure.
#8
What is the main goal of contractionary fiscal policy?
Reduce inflation
ExplanationContractionsary fiscal policy aims to curb inflationary pressures in the economy.
#9
What is the fiscal deficit in a government budget?
The excess of government expenditure over revenue, excluding borrowings
ExplanationFiscal deficit is the shortfall when government spending exceeds revenue, excluding borrowings.
#10
What is the purpose of an expansionary fiscal policy?
To stimulate economic growth
ExplanationExpansionary fiscal policy is implemented to boost economic growth.
#11
Which of the following is considered an indirect tax in a government budget?
Value-added tax (VAT)
ExplanationValue-added tax (VAT) is an example of an indirect tax in government budgets.
#12
Which fiscal policy tool involves changing the interest rates to influence economic activity?
Monetary policy
ExplanationMonetary policy adjusts interest rates to impact economic activity.
#13
What is the Laffer Curve associated with in fiscal policy?
Taxation and revenue
ExplanationLaffer Curve explores the relationship between tax rates and government revenue.
#14
In the context of fiscal policy, what does the term 'automatic stabilizers' refer to?
Built-in mechanisms that stabilize the economy
ExplanationAutomatic stabilizers are features that naturally stabilize economic fluctuations.
#15
What is the crowding-out effect in fiscal policy?
Reduced private investment due to increased government borrowing
ExplanationCrowding-out effect occurs when government borrowing limits private sector investments.
#16
Which economic concept is associated with the 'Laffer curve' in fiscal policy?
Supply-side economics
ExplanationLaffer Curve is linked to the principles of supply-side economics.
#17
Which component of the government budget includes payments on past borrowings?
Debt servicing
ExplanationDebt servicing involves repaying past borrowings in the government budget.
#18
What is the purpose of a 'countercyclical fiscal policy'?
To stabilize the economy by opposing the prevailing cycle
ExplanationCountercyclical fiscal policy aims to stabilize the economy by going against the current economic cycle.