ECO Chapter 17 Quiz

22. Which of the following is the percentage of annual US government spending allocated to foreign aid?

1%

9. A government collects $70 billion quarterly in tax revenue. Each year it allocates $15 billion to the justice system and $29 billion for the administrative costs. What percentage of its total annual tax revenue is left for allocation to the remaining categories of government spending?

84.29%

6. _____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic stabilizers

12. What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

8. If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:

a budget deficit

15. During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

aggregate demand curve will shift to the right

14. The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.

an expansionary fiscal policy; an increase in government spending

2. A ______________________ means that government spending and taxes are equal.

balanced budget

21. A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

3. If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus

17. If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

23. Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.

expansionary fiscal policy; lead to a budget deficit

5. Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

10. If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase

13. If a country's GDP increases, but its debt decreases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase or decrease

7. If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes

increase or decrease

1. The current level of US government accumulated debt, when measured in nominal dollars:

is higher than it has ever been.

19. A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

4. A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

18. When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

24. If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

regressive.

16. When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget.

smaller deficit

11. When inflation begins to climb to unacceptable levels in the economy, the government should:

use contractionary fiscal policy to shift aggregate demand to the right

20. The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life.

an estate and gift tax; to the next generation