Government Finance and Fiscal Policy Quiz

Income tax is a direct tax on individuals' earnings and is a key source of government revenue.

The debt-to-GDP ratio is a measure used to assess the sustainability of a country's public debt relative to its economic output.

Sequestration refers to automatic spending cuts that are triggered by law in order to reduce government spending.

Government subsidies are provided to encourage specific economic activities or industries by reducing costs or promoting growth.

Automatic stabilizers are built-in fiscal measures that automatically stabilize the economy by adjusting to economic fluctuations without additional government intervention.

GDP, or Gross Domestic Product, is a measure of the total economic output of a country and is used to assess its financial health.

Raising interest rates is a contractionary fiscal policy measure that aims to reduce spending and control inflation.

Unemployment benefits act as automatic stabilizers, providing income support during economic downturns and helping stabilize overall economic activity.

A government budget deficit is used to boost economic growth by increasing spending and investment.

An expansionary fiscal policy aims to boost economic growth by increasing government spending or reducing taxes.

Sovereign wealth funds are established to invest a country's surplus funds, often from commodities, for long-term benefits and future generations.

The Laffer curve demonstrates the connection between tax rates and the amount of tax revenue collected by the government.

The Federal Reserve is the central banking system of the United States and is responsible for formulating and implementing monetary policy.

The crowding-out effect occurs when government spending reduces private sector investment by absorbing available resources.

Countercyclical fiscal policy aims to stabilize the economy by offsetting the effects of economic downturns or upturns.