Year 12 Economics AOS 1 unit 4 budgetary policy [1]

The use of taxes and government spending to affect the economy

• Monetary Policy
• Fiscal Policy
• Contractionary Policy
• Expansionary Policy

If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?

• Selling securities on the open market
• Raising interest rates
• Reducing government spending
• Raising reserve requirements

How are fiscal and monetary policies similar?

• They both use the same tools to fix economic problems
• They both try to promote economic stability.
• They always must have Congressional approval before passing.
• They both are decided by a Board of Governors.

An example of expansionary fiscal policy would be

• cutting taxes.
• cutting government spending.
• cutting production of consumer goods.
• cutting prices of consumer goods.

Which of the following is not a tool of fiscal policy?

• Taxing
• Spending
• Interest Rates
• All of these options are tools of fiscal policy.

When the government raises taxes, what does it take out of circulation?

• Money
• Credit
• People
• Jobs

To promote higher economic growth, the best way is to

• decrease government spending and increase taxation.

• decrease government spending and decrease taxation.

• increase government spending and decrease taxation.

• increase government spending and increase taxation.

Corporate tax works to influence AD via a change in

• cost of production which subsequently affects investment.

• after-tax profits which subsequently affects investment.

• interest rate which subsequently affects consumption.

• disposable income which subsequently affects consumption.

Progressive tax structure is when

• the tax rate declines as income increases

• the tax rate increases as income increases

• the tax rate remains the same, regardless of size of income

• the tax rate increases the total volume of consumer expenditures

if we are in a recession, fiscal policy should

• reduce agricultural subsidies

• postpone highway construction programs

• reduce taxes

• have a surplus budget