#1
What is the primary source of revenue for the government?
Individual income taxes
ExplanationRevenue primarily generated from taxes levied on individuals' incomes.
#2
What is the main purpose of a government budget?
To allocate resources and manage finances
ExplanationGuiding document that determines how government resources will be allocated and finances managed.
#3
In the context of government budgeting, what is a regressive tax?
A tax that decreases as income increases
ExplanationTax system where the tax burden decreases as income rises, disproportionately affecting lower-income individuals.
#4
What is the purpose of a government budget surplus?
To increase government debt
ExplanationCondition where government income exceeds its spending, potentially leading to increased savings or debt reduction.
#5
What is the primary purpose of a government budget deficit?
To stimulate economic growth
ExplanationDeficit spending aimed at injecting funds into the economy to foster growth during periods of economic downturn.
#6
Which type of budget estimates the government's expenditures and revenues for the upcoming fiscal year?
Annual budget
ExplanationBudget outlining expected government spending and revenue for the forthcoming fiscal period.
#7
What is the term for a budget deficit that occurs when government expenditures exceed revenues?
Deficit
ExplanationA situation where government spending surpasses its income, leading to a shortfall.
#8
Which budgetary component represents the government's plan for acquiring and disposing of its financial assets?
Capital budget
ExplanationBudget detailing planned investments in assets such as infrastructure and equipment.
#9
What is the term for a situation where government expenditures are equal to government revenues?
Balance
ExplanationState where government spending equals its revenue, resulting in a stable financial position.
#10
Which economic principle suggests that higher government spending can stimulate economic activity during a recession?
Keynesian Economics
ExplanationEconomic theory advocating for government intervention, especially through fiscal policy, to mitigate economic downturns and stabilize the economy.
#11
What is the primary purpose of a balanced budget?
To ensure government revenues exceed expenditures
ExplanationBudgetary goal where government income surpasses its spending, aiming for fiscal stability.
#12
In the context of fiscal policy, what does contractionary policy aim to achieve?
Control inflation
ExplanationPolicy designed to reduce inflationary pressures by decreasing aggregate demand.
#13
Which economic indicator is often used to measure the overall health of an economy?
Gross Domestic Product (GDP)
ExplanationA measure of a nation's economic activity, encompassing the total value of goods and services produced within its borders.
#14
Which fiscal policy approach involves increasing government spending and cutting taxes to stimulate economic growth?
Expansionary policy
ExplanationPolicy aimed at boosting economic activity by increasing public spending and reducing tax burdens.
#15
What does the term 'automatic stabilizer' refer to in the context of fiscal policy?
Built-in features that stabilize the economy without specific legislative action
ExplanationEconomic mechanisms designed to counteract fluctuations without direct intervention, such as unemployment benefits or progressive tax systems.
#16
In the context of fiscal policy, what is the crowding-out effect?
An increase in government spending leading to decreased private investment
ExplanationPhenomenon where increased government expenditure results in reduced private sector investment due to competition for resources.
#17
Which factor is NOT typically considered in the formulation of fiscal policy?
Exchange rates
ExplanationVariable outside the traditional scope of fiscal policy formulation, relating to currency valuation and international trade dynamics.