Budget Quiz

A discretionary change occurs in the federal budget:

• when a government collects more tax.

• When economic activity affects budgetary outcomes

• when the government increases tax rates.

• when automatic stabilisers operate.

The structural (discretionary) component of the budget is about

• Falling income tax revenues that occur as unemployment levels rise.

• The effects of cyclical economic activity on budgetary outcomes.

• Government decisions about tax rates and spending programs.

• Rising income tax revenues that occur as employment levels rise.

In periods of low economic growth, budgetary policy in Australia can be used to increase economic growth by:

• increasing government spending and increasing income taxes.

• increasing government spending and decreasing income taxes.

• decreasing government spending and increasing income taxes.

• decreasing government spending and decreasing income taxes.

A slowdown in global economic growth will generally result in:

• the cyclical (automatic) component of the budget to move into deficit.

• the structural and cyclical components of the budget to move into deficit.

• the structural (discretionary) component of the budget to move into deficit.

• the structural (discretionary) component of the budget to move into surplus.

Which of the following is an example of an automatic stabiliser?

• increased individual income tax rates

• a planned increase in new infrastructure spending

• increased interest rates due to increased economic activity

• increased tax collection due to increased economic activity

In an economy with a large budget deficit and subdued economic growth, the likely effect of having a contractionary budgetary policy is that:

• inflationary pressures would rise.

• interest rates on borrowing would fall.

• the labour force underutilisation rates would rise.

• increased tax collections would contribute to increased growth.

If the government balanced its budget each year, the most likely effect of this would be:

• the business cycle would disappear.

• tax rates would remain constant from year to year.

• recessions would be worse than they would be otherwise.

• government spending would remain constant from year to year.

Government policy to increase the size of the budget deficit during a period of low economic growth is most likely to result in:

• a decrease in the inflation rate, an increase in the unemployment rate and a decrease in the economic growth rate.

• an increase in the inflation rate, a decrease in the unemployment rate and a decrease in the economic growth rate.

• an increase in the inflation rate, an increase in the unemployment rate and an increase in the economic growth rate.

• an increase in the inflation rate, a decrease in the unemployment rate and an increase in the economic growth rate.

Automatic stabilisers in the government budget during a period of sustained economic growth are likely to deliver:

• a budget surplus as tax revenue increases and government welfare payments decrease.

• a budget surplus as tax revenue decreases and government welfare payments increase.

• a budget deficit as tax revenue increases and government welfare payments decrease.

• a budget deficit as tax revenue decreases and government welfare payments increase.

As the level of aggregate demand slows, the budget outcome will

• improve as unemployment increases.

• deteriorate as unemployment increases.

• improve as social security payments decrease.

• deteriorate as social security payments decrease