#1
What is the primary goal of government fiscal policy?
To promote economic stability
ExplanationFiscal policy aims to maintain economic stability through government spending and taxation adjustments.
#2
Which of the following is a tool used in expansionary fiscal policy?
Increasing government spending
ExplanationExpansionary fiscal policy involves boosting the economy by raising government spending.
#3
What is the relationship between fiscal policy and national debt?
Fiscal policy can influence the level of national debt
ExplanationGovernment fiscal decisions impact the national debt, as policies affect revenue and expenditure.
#4
How does a budget surplus differ from a budget deficit?
A surplus occurs when government revenue exceeds spending, while a deficit occurs when spending exceeds revenue
ExplanationA budget surplus implies excess revenue, while a deficit results from spending surpassing revenue in fiscal policy.
#5
What is the role of automatic stabilizers in fiscal policy?
They automatically adjust to counteract economic fluctuations
ExplanationAutomatic stabilizers in fiscal policy automatically respond to economic changes, stabilizing the economy.
#6
In fiscal policy, what does the term 'discretionary spending' refer to?
Spending that is authorized by specific legislation and can be adjusted annually
ExplanationDiscretionary spending, authorized by legislation, allows for annual adjustments in fiscal policy.
#7
Which entity is responsible for creating and implementing fiscal policy in the United States?
Congress and the President
ExplanationFiscal policy in the U.S. is shaped by both the legislative and executive branches—Congress and the President.
#8
What is the crowding-out effect in fiscal policy?
Increased government borrowing leads to reduced private sector borrowing
ExplanationGovernment borrowing can limit private sector borrowing, known as the crowding-out effect in fiscal policy.
#9
What is the Laffer Curve in the context of fiscal policy?
A curve illustrating the relationship between tax rates and tax revenue
ExplanationThe Laffer Curve depicts the correlation between tax rates and government tax revenue, guiding fiscal policy decisions.
#10
What is the debt-to-GDP ratio used for in analyzing national debt?
To compare the level of government debt to the overall size of the economy
ExplanationThe debt-to-GDP ratio assesses government debt relative to the total economic output, aiding in national debt analysis.
#11
What is the Phillips Curve and how does it relate to fiscal policy?
It shows the relationship between inflation and unemployment, influencing policy decisions on taxation
ExplanationThe Phillips Curve depicts the trade-off between inflation and unemployment, guiding fiscal policy decisions on taxation.