4.2.5.1 Fiscal policy NOTES

What does government spending typically involve?

• Expenditures on public goods and services like education and healthcare

• Personal expenditures of government officials

• Funding international travel

• Investments in private sector businesses

What is the primary purpose of taxation?

• To invest in international markets

• To cover travel expenses for state officials

• To fund private enterprises

• To generate revenue for the government

What occurs when government expenditures exceed revenues?

• Budget surplus

• Budget deficit

• Profit generation

• Equal budget balance

Which policy is used to boost demand during economic downturns?

• Neutral fiscal policy

• Expansionary fiscal policy

• Contractionary fiscal policy

• External fiscal policy

What is a direct tax?

• A tax on corporate dividends

• A tax on consumer goods

• A tax levied directly on income or wealth

• A tax on imports and exports

Which type of tax imposes a higher burden on lower-income individuals?

• Proportional tax

• Progressive tax

• Regressive tax

• Indirect tax

What does a progressive tax system entail?

• Higher rates on higher-income earners

• A flat tax rate for all income levels

• Lower rates for higher-income earners

• Uniform tax rates on all goods and services

What is the role of the Office for Budget Responsibility (OBR)?

• Manages the UK's national parks

• Provides independent analysis of the UK's public finances

• Oversees the UK's foreign diplomatic missions

• Regulates the UK's private sector

What is the effect of a budget surplus?

• It can help reduce national debt levels

• It reduces government revenue

• It increases the national debt

• It has no effect on national debt

What is the main reason governments levy taxes?

• To fund private luxury projects

• To finance public expenditures

• To decrease national productivity

• To solely control inflation