What is included in a government budget calculation?
indirect tax revenue
export revenue
external costs
opportunity cost
When is the budget described as balanced?
when the demand for money and the supply of money are equal
when exports and imports are equal
when direct taxes and indirect taxes are equal
when government spending and government revenue are equal
What is not included in public expenditure?
interest payments on government borrowing
subsidies to bus companies from local government
capital spending by firms
investment in defence by the central government
Due to a rise in the number of retired people, there has been increased demand for some government expenditure. Which type of government expenditure is most likely to be directly affected?
re-training grants
defence
street lighting
health services
The table shows a government’s receipts from taxation. What is the total amount of revenue raised by indirect taxes?
$300m
$350m
$385m
$435m
Which macroeconomic aim, if achieved, is most likely to increase a government budget surplus?
income redistribution
low inflation
balance of payments stability
full employment
A government increased revenue by increasing taxes on firms. Which tax did it increase?
inheritance tax
sales tax
profits tax
value added tax
A government decides to increase tax revenues from consumer expenditure. Which tax will it increase?
death duties
profits tax
value added tax
capital gains tax
Tax is charged at 1.45% on all wages earned to pay for basic medical provision. How would this tax be described?
indirect and regressive
direct and proportional
direct and regressive
indirect and proportional
The Value Added Tax (sales tax) is 20% in a country. Different consumers buying the same product have to pay the same amount of tax. What kind of tax is this?
direct
progressive
proportional
regressive
Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive when comparing high-income and low-income purchasers?
High-income purchasers pay a higher percentage of their income in tax.
High income purchasers pay a lower percentage of their income in tax.
Low-income purchasers pay a lower percentage of their income in tax.
Low-income purchasers and high-income purchasers pay the same percentage of of their income in tax.
The table shows the tax that an individual would pay at different levels of disposable income. Which type of tax is shown in the table?
corporation tax
indirect tax
progressive tax
regressive tax
The government wants to reduce the consumption of cigarettes. Which policy would be most likely to do this?
increasing a subsidy on cigarettes
increasing income tax
increasing interest rates
increasing the indirect tax on cigarettes
A government decides to leave direct taxes unchanged but to increase indirect taxes. What is this policy intended to achieve?
to increase the value of the exchange rate
to redistribute income from higher to lower income groups
to reduce a budget deficit
to reduce the rate of inflation
A gov. increases its revenue by higher direct taxation of both personal incomes and company profits. What is most likely to be the reason for this increase?
to control spending on specific consumer goods
to encourage business investment
to provide public and merit goods
to reduce pollution from industrial production
The table shows the income tax rate paid by workers at different levels of income in two years. What is most likely to be the objective in changing tax rates?
to reduce a current account deficit
to reduce income inequality
to reduce inflation
to reduce structural unemployment
A gov. increases the rate of progressive income tax and its spending on hospitals. What is likely to happen to distribution of income and to living standards?
A
B
C
D
What is the most likely impact of lower direct taxes on total demand and on total supply?
A
B
C
D
A government decreased the tax on all goods produced in its country. What is the most likely consequence of this?
a decrease in exports
an increase in imports
an increase in production
a worsening of the balance of trade in goods
The US puts a 25% tariff on Chinese steel to protect jobs in the US steel industry. Under which condition would this policy be most effective?
The price elasticity of demand for Chinese steel is –2.5.
The price elasticity of demand for Chinese steel is –0.5.
The price elasticity of supply for Chinese steel is 2.5.
The price elasticity of supply for Chinese steel is zero.
What is fiscal policy?
government decisions on money supply and interest rates taken to influence total demand
government decisions on spending and taxation to influence total demand
government measures designed to influence total supply in the economy
government regulation of the foreign exchange rate to influence imports
What is a fiscal policy measure?
direct tax
exchange rates
interest rates
regulation
A government decides to boost the economy through the use of a budget deficit. Which target should it adopt to achieve this aim?
Direct taxation should exceed indirect taxation.
Export earnings should exceed import expenditure.
Government savings should exceed government investment.
Government spending should exceed government revenue.
A gov. wants to reduce both its budget deficit and amount of poverty in its country. Which fiscal policy measure is most likely to achieve both of these aims?
decreasing the rate of progressive income tax
decreasing government spending on welfare benefits
increasing the rate of progressive income tax
increasing government spending on welfare benefits
The gov. announces a forecast budget deficit of $234 billion, as part of its fiscal policy. What is the effect of this forecast budget deficit likely to be?
a decrease in economic growth
a decrease in inflation
an increase in employment
an increase in unemployment