CSC Chapter 5

Question 1

The government has announced it intends to lower personal income tax rates by 2%. Identify the economic situation the government is trying to influence.

Answer 1

The economy is in a recession.

Question 2

Identify the correct government action to stimulate the economy if growth is slowing.

Answer 2

Run a Deficit

Question 3

The government ended the program that provided tax subsidies to solar energy companies. Identify the economic problem the government is addressing.

Answer 3

To reduce rapid growth and potential inflation by increasing taxes to businesses.

Question 4

The government determines that it needs to slow down the economy using fiscal policy tools in order to control inflation. Identify the impact this policy will have on the various components of gross domestic product (GDP).

Answer 4

Government spending (G) and business spending (I) will decrease and taxation will increase, causing consumption (C) to fall.