Fiscal Study Guide

Why is Fiscal Policy important?

To promote economic stability

The U.S. government uses taxes, government spending, and transfer payments to promote economic growth and stability in our country. These actions are part of which government policy?

fiscal policy

Suppose Debbie Dawn leaves her job at the Acme Jet-Pack Company to pursue her acting career. If she is unable to land any acting jobs for a few months, what type of unemployment is she most likely experiencing?

frictional unemployment

A tax is considered regressive when it

imposes a higher percentage rate on lower incomes

What is an example of a proportional tax?

sales and excise taxes

Which of the following is an example of a public good?

The 575 highway

Which is used to measure whether a country is in a recession or expansion

Unemployment rate, inflation rate, GDP, CPI

The lowest point in an economic contraction is called

a trough

GDP may be defined as the market value of

all final goods and services produced within our nation's borders in a given year.

If GDP is increasing and the unemployment rate is decreasing, how would Fiscal Policy try to fix this economic situation?

decrease government spending

If the unemployment rate is rising and the GDP is falling, the fiscal policy that the federal government should MOST likely follow is

decrease taxes

A contractionary fiscal policy would most likely result in?

the cutting of government spending and the raising of taxes

If a nation currently has a budget deficit, their income is not covering the cost of running their country. If this budget is not revised, what could be a possible result of this situation?

A mounting debt

According to the demand-pull theory, what is responsible for inflation?

Demand by consumers for goods and services exceed existing supply.

If Fiscal Policy is trying to promote stability and economic growth through tax cuts, what type of policy is being used?

Expansionary Fiscal Policy

If the economy is in an inflationary period, what action would Fiscal Policy most likely take?

Increase taxes

A consumer is at the store and purchases a new vacuum cleaner. At checkout, that consumer will have to pay an additional tax on that purchase; a sales tax. What type of tax is a sales tax?

Proportional tax

What is true about an excise tax?

They are regressive. The federal government levies them on products such as gasoline, cigarettes and alcohol. They are levied on the manufacture, sale or consumption of certain goods

Government officials adopt an expansionary fiscal policy. Which action would be consistent with this policy?

increase govt spending

An expansionary fiscal policy would most likely result in?

increasing government spending and the lowering of taxes