#1
What is the primary goal of government fiscal policy?
Minimizing unemployment
ExplanationMaintaining stable employment levels
#2
What is the concept of a balanced budget in fiscal policy?
A budget where government revenue equals government spending.
ExplanationEquilibrium between government income and expenditure
#3
What is the primary goal of expansionary fiscal policy?
To increase aggregate demand and stimulate economic growth
ExplanationBoosting economic activity and demand
#4
Which of the following is an expansionary fiscal policy measure?
Increasing government spending
ExplanationBoosting economic activity through higher spending
#5
What is the concept of the fiscal multiplier in economics?
The impact of fiscal policy on overall economic activity
ExplanationMeasure of the ripple effect of fiscal changes
#6
What is the difference between fiscal policy and monetary policy?
Fiscal policy involves changes in government spending and taxation, while monetary policy involves changes in interest rates and money supply.
ExplanationGovernment's spending and taxation vs. central bank's monetary control
#7
What is the purpose of an automatic stabilizer in fiscal policy?
To automatically adjust government spending in response to economic fluctuations.
ExplanationStabilizing effect on economy without explicit action
#8
How does a budget deficit differ from a national debt in fiscal policy?
A budget deficit occurs when government spending exceeds revenue in a specific fiscal year, while national debt is the total accumulated amount of deficits over time.
ExplanationShort-term spending vs. long-term accumulated deficits
#9
How does discretionary fiscal policy differ from automatic stabilizers?
Automatic stabilizers are government policies implemented without specific legislative action, while discretionary fiscal policy requires explicit government decisions.
ExplanationPre-set policies vs. government's explicit decisions
#10
In a recession, what type of fiscal policy is typically recommended?
Expansionary fiscal policy
ExplanationStimulating demand to counter economic decline
#11
What is the crowding-out effect in the context of fiscal policy?
Increased government spending leading to higher interest rates
ExplanationGovernment spending reducing private sector investment
#12
What is the Laffer curve used to illustrate in fiscal policy?
The impact of taxation on government revenue and economic activity.
ExplanationTax rates' effect on government revenue and economic performance
#13
In the context of fiscal policy, what is the difference between a progressive tax and a regressive tax?
A progressive tax takes a higher percentage of income from high-income earners, while a regressive tax takes a higher percentage from low-income earners.
ExplanationTax rates based on income levels vs. uniform tax rates
#14
What is the Phillips Curve in the context of fiscal policy and macroeconomics?
A curve illustrating the trade-off between inflation and unemployment.
ExplanationRelationship between inflation and unemployment rates
#15
What is the concept of Ricardian equivalence in fiscal policy?
The theory that individuals consider future tax liabilities when evaluating current government spending.
ExplanationExpectation of future tax obligations affecting current behavior