#1
Which of the following is NOT a function of government?
Maximizing profits
ExplanationGovernments do not aim to maximize profits but rather provide public services and regulate the economy.
#2
What is the primary tool used by governments to influence the economy?
Fiscal policy
ExplanationFiscal policy involves government spending and taxation to stimulate or restrain economic growth.
#3
Which of the following is NOT a component of government spending?
Tax revenues
ExplanationTax revenues are government income, not expenditure.
#4
What is the term for the total value of all goods and services produced within a country's borders in a given period?
Gross Domestic Product (GDP)
ExplanationGDP measures the economic output of a nation.
#5
Which of the following is an example of expansionary fiscal policy?
Increasing government spending
ExplanationExpanding government spending stimulates economic activity, promoting growth.
#6
What is the name for the difference between government revenue and government spending?
Budget deficit
ExplanationWhen spending exceeds revenue, it leads to a budget deficit.
#7
What is the main goal of contractionary fiscal policy?
To reduce inflation
ExplanationContractionary fiscal policy aims to decrease aggregate demand, thereby curbing inflationary pressures.
#8
Which of the following is a characteristic of a regressive tax?
Tax rate decreases as income increases
ExplanationRegressive taxes take a higher proportion of income from low-income earners compared to high-income earners.
#9
Which of the following is a characteristic of an automatic stabilizer in fiscal policy?
Adjusts automatically in response to economic conditions
ExplanationAutomatic stabilizers automatically kick in during economic downturns to stabilize incomes and spending.
#10
Which of the following is an example of an automatic stabilizer in fiscal policy?
Unemployment insurance
ExplanationUnemployment insurance provides income support during periods of job loss, automatically stabilizing household incomes.