Fiscal Policy

Question 1

Fiscal Policy

Answer 1

Government policy that attempts to manage the economy by controlling taxing and spending.

Question 2

Fiscal Policy Tools

Answer 2

Government spending and taxes.

Question 3

Government Budget

Answer 3

A type of plan of a country’s tax revenues and government expenditures over a period of time.

Question 4

Budget Defecit

Answer 4

A shortfall of tax revenue from government spending.

Question 5

Budget Surplus

Answer 5

An excess of tax revenue over government spending.

Question 6

Where does the government get money from?

Answer 6

Tax revenues
Income tax
Corporation tax
Inheritance tax
Sales tax
Import taxes
Non-tax revenues
Fines, tolls, fees and penalties
Foreign aid
Loans from banks
Revenue from state-owned enterprises Donations

Question 7

What does the government spend money on?

Answer 7

Communications
Debt interest
Defence
Education
Environment
Healthcare
Housing
Law and order
Postal services
Roads and motorway
Sewage systems
Transport
Welfare benefits

Question 8

Reasons for Government Spending

Answer 8

1)essential services
2)redistribution of income
3)correct market failures

Question 9

Reason for Taxes

Answer 9

1) fund key areas
2) achieve economic objectives
3) reduce negative externalities
4) increase positive externalities
5) protect the domestic producers

Question 10

Tax Burden

Answer 10

A measurement of taxes paid as a proportion of income.

Question 11

Country Tax Burden

Answer 11

Calculating total tax revenues as a proportion of gross domestic product (GDP).

Question 12

Individual and Company Tax Burden

Answer 12

The absolute value of tax paid or by the amount of tax paid as a proportion of their income or profits.

Question 13

Direct Tax

Answer 13

A tax paid directly by the person or organization on whom it is levied.

Question 14

Indirect Taxes

Answer 14

Taxes levied on spending to buy goods and services, called indirect because payments of some or all of the taxes by the consumer is paid to the government authorities by the firms.

Question 15

Progressive Tax

Answer 15

A tax for which the percentage of income paid in taxes increases as income increases.

Question 16

Regressive Tax

Answer 16

A tax for which the percentage of income paid in taxes decreases as income increases.

Question 17

Proportional Tax

Answer 17

A tax in which the average tax rate is the same at all income levels.

Question 18

Different Taxes

Answer 18

Income tax
Corporate tax
Sales Tax
Excise duties
Custom duties
Capital gains tax
Inheritance tax
Stamp duties
Carbon tax
Windfall tax

Question 19

Tax Evasion

Answer 19

Willful failure to pay taxes.

Question 20

Tax Avoidance

Answer 20

The use of legitimate methods to reduce one’s taxes.

Question 21

Expansionary Fiscal Policy

Answer 21

An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output.

Question 22

Contractionary Fiscal Policy

Answer 22

Fiscal policy used to decrease aggregate demand or supply. Deliberate measures to decrease government expenditures, increase taxes, or both. Appropriate during periods of inflation.

Question 23

Government Role

Answer 23

Their role is to collect taxes from businesses and households as well as participate in the loanable funds market. To create fiscal policy.

Question 24

Defecit

Answer 24

When government spending exceeds revenues.

Question 25

Surplus

Answer 25

When government revenues exceeds spending.