10. Government Economic Policy

Question 1

What are the three types of government spending?

Answer 1

1. Government Final consumption expenditure
2. Government investment
3. Transfer payments

Question 2

Define direct tax.

Answer 2

A direct tax paid directly by the person or the business on whom the tax is imposed.

Question 3

Define indirect tax

Answer 3

A tax collected by the intermediary from the person who ultimately bears the the economic burden of the tax

Question 4

What is the quantity theory of money?

Answer 4

This is the theory which argues that changes in the level of prices are primarily caused by changes in the supply of money.