30 Questions
Which type of tax is levied on income, wealth, and corporate profits?
Direct taxes
Which of the following is NOT an attribute of a desirable tax policy?
Fairness
Which fiscal policy tool can be adjusted almost immediately after they are announced and can influence spending behavior instantly?
Indirect taxes
What is the major philosophical issue among economists regarding tax policy?
Deviation from efficiency
Which of the following is NOT an advantage of indirect taxes?
Cost little or no money
Why are capital spending plans more time-consuming to implement compared to other fiscal policy tools?
They require detailed planning and legal permissions
What is one valid criticism of an active fiscal policy?
It takes longer to implement compared to other fiscal policy tools
Which of the following is NOT considered as government spending on goods and services?
Job search allowances
What is the purpose of transfer payments?
To provide a basic minimum level of income for low-income households
Which type of government spending has a big impact on a country's skill level and overall labor productivity?
Current government spending
What does capital expenditure include?
Infrastructure spending
Why can't transfer payments be included in the definition of GDP?
They do not reflect a reward to a factor of production for economic activity
What are transfer payments made through the social security system?
All of the above
What are the justifications for government spending?
All of the above
Which of the following is the correct equation for net taxes (NT) in terms of national income (Y) and the net tax rate (t)?
NT = Y(1 - t)
What is the marginal propensity to consume (MPC) if the marginal propensity to save (MPS) is 0.2?
0.9
What is the multiplier if the MPC is 0.9?
10
Which fiscal tool has the biggest impact on aggregate spending and output?
Direct government spending
What is the formula for calculating disposable income (YD) in terms of national income (Y) and net taxes (NT)?
YD = Y - NT
What is the formula for calculating the net impact of the government sector on aggregate demand?
G - T + B = Budget surplus OR deficit
What is the formula for calculating total tax revenue from net taxes (tY)?
tY = Y - NT
According to the text, if the government increases spending by an amount G, what happens to disposable income?
Disposable income rises by (1 – t)G
What is the term used to describe the rise in aggregate demand and output due to an increase in government spending?
Fiscal multiplier
What is the formula for calculating the fiscal multiplier?
1/[1 – c(1 – t)]
If the tax rate is 0.2 and the marginal propensity to consume is 0.9, what is the fiscal multiplier?
3.57
What is the balanced budget multiplier?
The multiplier effect of a balanced budget
In a balanced budget, what happens to aggregate output?
Aggregate output rises
If an economy has an equilibrium output of USD1,000 and government spending is set at USD200, what will happen to output?
Output will increase by USD200
What is the initial impact of a balanced fiscal package on aggregate demand?
Aggregate demand rises
What is the effect of a genuinely balanced budget change on output?
Output remains the same
Quiz: The Impact of Delayed Tax Rises on Consumption Discover the effects of delayed tax rises on consumption in this quiz. Learn about the expectational effects and how they can influence the economy. Test your knowledge on the potential impact of announcing future income tax rises a year ahead and its immediate effect on consumption.
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