Budget Stance Quiz

In times of recession, budgetary policy in Australia can be used to expand economic growth by:

• increasing government spending and increasing income taxes.

• increasing government spending and decreasing income taxes.

• decreasing government spending and decreasing income taxes.

• decreasing government spending and increasing income taxes.

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.

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.

Two economic indicators of contractionary budgetary policy in Australia would be:

• lower tax rates and lower interest rates.

• lower tax rates and reduced government spending.

• higher tax rates and reduced government spending.

• lower tax rates and increased government spending.

Which of the following is least likely to be indicative of an expansionary budgetary policy

• A budget deficit of 1 billion that includes 500m of expenditure on drought relief

• A budget deficit of 1 billion that includes 500m of expenditure on global warming initiatives

• A budget deficit of 2 billion that includes 1.6Bm of export grants or subsidies

• A budget deficit of 2 billion that includes 1.6Bm of tied to foreign aid

Which type of budget would be considered to be most 'expansionary' in terms of the impact on AD in the economy?

• A reduction in the size of the surplus

• An increase in the size of the surplus

• An increase in the size of the deficit

• A decrease in the size of the deficit

Which of the following best describes what would happen if the economy entered the expansion phase

• Tax revenue would increase and gov’t expenditure would fall reducing the deficit

• Tax revenue would decrease and gov’t expenditure would increase increasing the deficit

• Tax revenue would decrease and gov’t expenditure would increase increasing the deficit

• Tax revenue would increase and gov’t expenditure would fall increasing the deficit

A period of expansion in the business cycle is most likely to occur when:

• income tax rates are increased.

• government capital expenditure is increased.

• businesses lack confidence in future profit levels.

• banks fail to pass on reductions in the cash interest rate.

Expansionary monetary policy is most likely to cause

• a decrease in welfare payments.

• an appreciation of the Australian dollar.

• a reduction in the rate of economic growth.

• an increase in the size of the budget deficit.

A slowdown in global economic growth will generally cause:

• 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.