Fiscal Policy: Spending Quiz

Questions and Answers

What does deficit spending require a government to do?

Cut taxes

Lay off workers

Hire more workers

Take on debt (correct)

When a government creates a budget, it is seeking a way to:

Spend as much revenue as possible

Return as much money to taxpayers as possible

Allocate money to programs and projects (correct)

Cut spending to a bare minimum

Which of these effects of expansionary spending would a government most want to avoid?

Growth in consumer spending

Higher inflation (correct)

Growth in production

Higher employment

The graph shows the federal debt between 1993 and 2013. What trend about the federal debt does the graph reveal?

It is increasing Signup and view all the answers

The graph shows government spending as a percentage of GDP from 1990 to 2012. At its peak, government spending made up about:

One quarter of GDP Signup and view all the answers

The graph shows the federal budget from 1980 to 2010. In which period did the federal budget show the greatest deficit?

2000 to 2010 Signup and view all the answers

When revenues are higher than expenditures in a budget, that budget:

Shows a surplus Signup and view all the answers

This diagram shows a government's approach to taxing and spending. Which of the following would be a good title for this diagram?

Fiscal Policy Signup and view all the answers

What is the main goal in creating the federal budget?

Deciding how to manage the government's tax revenue and expenditures Signup and view all the answers

When governments inject money into the economy, which of the following are their goals? (Check all that apply)

Encouraging competition Signup and view all the answers

Study Notes

Deficit Spending and Government Debt

Deficit spending requires a government to take on debt to finance its expenditures.
The federal debt has been on an increasing trend from 1993 to 2013, indicating persistent borrowing.

Government Budgeting

When creating a budget, a government aims to allocate money effectively to various programs and projects.
A budget that shows revenues higher than expenditures signifies a surplus, while the opposite indicates a deficit.

Expansionary Spending Effects

While higher employment, growth in production, and consumer spending are desirable outcomes of expansionary spending, higher inflation is an effect to avoid.

Government Spending as a Percentage of GDP

At its peak from 1990 to 2012, government spending accounted for about one-quarter of GDP.

Federal Budget Deficits

The greatest federal budget deficit occurred from 2000 to 2010, reflecting increased spending without corresponding revenue.

Fiscal Policy Insights

Fiscal policy encapsulates a government's strategies for taxing and spending to manage the economy, targeting stability, reduced unemployment, and improved production.
Effective fiscal policy also encompasses encouraging competition within the market.

Federal Budget Management Goals

The primary goal in crafting the federal budget focuses on managing government tax revenue and expenditures for economic balance and stability.

Description

Explore the intricacies of fiscal policy with this quiz focused on government spending and budgeting. Test your knowledge on key concepts, including deficit spending and budget allocation strategies. Ideal for students looking to deepen their understanding of economic policies.