Fiscal Policy
155 questions· page 1 of 16
The diagram shows aggregate demand (AD) and long-run aggregate supply (LRAS) with X as the initial equilibrium.
Which combination of policy and new final equilibrium point is correct?
Options
| policy | new final equilibrium point | |
|---|---|---|
| A | increased direct taxation | F |
| B | increased government spending on infrastructure | G |
| C | appreciation of the exchange rates | H |
| ** | D** | decreased interest rates |
Which combination of fiscal policy measures will reduce both the inflation rate and income inequality?
Options
| direct taxes | indirect taxes | subsidies on food and public transport | |
|---|---|---|---|
| A | decrease | decrease | increase |
| B | decrease | increase | increase |
| C | increase | decrease | increase |
| D | increase | increase | decrease |
What defines a progressive tax?
Options
A All taxpayers pay the same proportion of income in taxes.
B Low-income earners pay a lower proportion of income in taxes than high-income earners.
C Low-income earners pay less in taxes than high-income earners.
D Low-income earners pay more in taxes than high-income earners.
The table shows the amount of tax paid on three different levels of income.
Which combination shows a proportional income tax system?
Options
| tax paid on annual income of $10 000 | tax paid on annual income of $20 000 | tax paid on annual income of $40 000 | |
|---|---|---|---|
| A | 1000 | 1000 | 1000 |
| B | 1000 | 1500 | 2000 |
| C | 1000 | 2000 | 4000 |
| D | 1000 | 2500 | 8000 |
A government increases direct taxation to reduce its budget deficit.
How is this likely to affect the government’s ability to achieve its macroeconomic objectives?
Options
| economic growth | low inflation | low unemployment | |
|---|---|---|---|
| A | less likely | less likely | less likely |
| B | more likely | less likely | more likely |
| C | less likely | more likely | less likely |
| D | more likely | more likely | less likely |
An income tax has a tax-free allowance of $10 000 and a single rate of 25%.
What type of tax is this?
Options
A indirect
B progressive
C proportional
D regressive
The diagram shows aggregate demand (AD) and aggregate supply (AS) curves. The initial equilibrium is at X. A government decides to invest in an increase in infrastructure.
What will be the short-term effect of this policy on the equilibrium?
Options
A point A on Fig. 25.1
B point B on Fig. 25.1
C point C on Fig. 25.1
D point D on Fig. 25.1
The graph shows an individual’s income before and after the deduction of income tax.
Which change to this income tax system is most progressive?
Options
The diagram shows aggregate demand (AD) and aggregate supply (AS) where the initial equilibrium is at point X.
The central bank forecasts a rise in raw material costs. The government plans to increase spending on health.
What would be the new equilibrium in the short run if the forecasts prove to be accurate and the government plans are implemented?
Options
A point A on Fig. 18.1
B point B on Fig. 18.1
C point C on Fig. 18.1
D point D on Fig. 18.1
Which action is classified as a fiscal policy measure?
Options
A fixing a currency to another country’s currency
B tightening credit regulations on banks
C providing guidance to industry and the public
D managing changes in the level of government debt