Quiz on Budgeting and Fiscal Policy

What is the main objective of fiscal policy?

• To eliminate all forms of taxation

• To increase government spending only

• To achieve optimum allocation of resources

• To reduce taxes for all citizens

Which of the following is a tool of fiscal policy?

• Interest rates

• Government spending

• Stock market performance

• Consumer confidence

What does a budget deficit indicate?

• Insufficient tax revenues to fund spending

• Surplus in government funds

• Excess of revenues over expenditures

• Balanced budget

Which type of tax cannot be shifted to another entity?

• Indirect tax

• Sales tax

• Direct tax

• Value Added Tax

What is the purpose of contractionary fiscal policy?

• To boost GDP growth

• To increase tax revenue

• To decrease inflation

• To increase government spending

Which of the following is NOT a source of public revenue?

• Private donations

• Taxes

• Fines and penalties

• Grants

What is the definition of fiscal deficit?

• A surplus in government funds

• A balanced budget

• Excess of total expenditures over total income

• Excess of total income over total expenditures

Which of the following is a reason for budget deficit?

• Increase in foreign investments

• Rise in government expenditure

• Low government expenditure

• High tax collection

What is zero-based budgeting?

• A method that ignores past expenditures

• A budgeting process that starts from a zero base

• A method that uses previous budgets as a base

• A technique that only considers fixed costs

Which of the following is an example of capital expenditure?

• Payment of interest on debts

• Construction of a new highway

• Subsidies to farmers

• Salaries of government employees