Question 1

Which of the following does not function as an automatic stabiliser?
A) Unemployment benefit payments
B) Government expenditure on road building programs
C) The Goods and Services Tax (GST)
D) The personal income tax system

Accepted Answer

Automatic stabilizers work automatically to stabilize the economy during periods of economic fluctuations. They adjust without any need for government intervention. Unemployment benefit payments and the personal income tax system are examples of automatic stabilizers because they increase government spending during downturns and decrease it during upswings. GST does not function as an automatic stabilizer because it is a consumption tax that remains constant despite changes in economic conditions. Similarly, government expenditure on road building programs is not an automatic stabilizer because it is a discretionary fiscal policy measure that the government can control and adjust as needed.

Question 2

'Fiscal policy' (discretionary fiscal policy)is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability,healthy rates of economic growth,and high employment.
A) taxes; interest rates
B) taxes; financial liquidity in the economy
C) interest rates; financial liquidity in the economy
D) taxes; purchases

Accepted Answer

Discretionary fiscal policy involves changes in government spending (purchases) and taxes to achieve macroeconomic objectives. Interest rates and financial liquidity are tools of monetary policy, not fiscal policy.

Question 3

Which of the following is an example of discretionary fiscal policy?
A) An increase in the number unemployment benefit payments during a recession due to rising unemployment
B) An increase in income tax receipts during an expansion because incomes are rising
C) Tax increases to combat rising inflation
D) A decrease in income tax receipts during a recession because incomes are falling

Accepted Answer

Discretionary fiscal policy refers to deliberate changes in government spending and taxation to influence the economy. Tax increases to combat rising inflation are an example of a policy choice made to manage economic conditions, distinguishing it from automatic fiscal policies that occur without direct intervention, such as changes in tax receipts or unemployment benefits due to economic shifts.

Question 4

Which of the following is an automatic stabiliser?
A) Interest rate changes
B) Increases in government spending on schools
C) Reductions in nominal wages as inflation rates rise
D) Unemployment benefit payments to the unemployed

Accepted Answer

Unemployment benefit payments to the unemployed are automatic stabilizers as they increase during economic downturns, leading to an increase in consumer spending and overall economic activity.

Question 5

Active changes in tax and spending by government intended to smooth out the business cycle are called ________,and changes in taxes and spending that occur passively over the business cycle are called ________.
A) automatic stabilisers; discretionary fiscal policy
B) discretionary fiscal policy; automatic stabilisers
C) automatic stabilisers; monetary policy
D) discretionary fiscal policy; conscious fiscal policy

Accepted Answer

Active changes in tax and spending by government intended to smooth out the business cycle are called discretionary fiscal policy. Changes in taxes and spending that occur passively over the business cycle are called automatic stabilisers.

Question 6

Which of the following is a government 'expenditure' and not a government 'purchase'?
A) The federal government buys a new ship for the defence force.
B) The federal government pays the salary of police.
C) The federal government pays unemployment benefits.
D) The federal government pays to support medical research on AIDS.

Accepted Answer

Government expenditure refers to the government's spending on goods and services, including transfer payments such as unemployment benefits. Government purchase, on the other hand, refers to the government's acquisition of goods and services for its own use, such as buying a new ship or paying the salary of police. Therefore, paying unemployment benefits is a government expenditure, not a government purchase.

Question 7

Government expenditure in Australia as a percentage of GDP has consistently trended upward since the 1960s.

Accepted Answer

The answer of Government expenditure in Australia as a percentage...

Question 8

During which decade was government expenditure in Australia the highest as a proportion of GDP?
A) 1970s
B) 1980s
C) 1990s
D) 2000s

Accepted Answer

According to data from the World Bank, government expenditure as a proportion of GDP in Australia was highest in the 1980s, reaching a peak of 33.9% in 1984. It then gradually declined throughout the 1990s and 2000s, and was at 25.9% in 2020.

Question 9

What is 'fiscal policy' and who is responsible for fiscal policy?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of What is 'fiscal policy' and who is...

Question 10

In 2015/2016,after social security and welfare payments,which of the following is the second largest category of Australian federal government expenditures at nearly 16 per cent of the total?
A) Defence spending
B) Education
C) Interest on the debt
D) Health care

Accepted Answer

The answer of In 2015/2016,after social security and welfare payments,which...

Question 11

Discretionary fiscal policy is when _________.
A) existing taxation policy automatically smoothes out business cycle fluctuations in the economy
B) the government changes the levels of expenditure or taxation to achieve a macroeconomic aim
C) policy is left to the discretion of the Reserve Bank of Australia
D) politicians are discrete about policy changes and do not advise consumers or producers of new policies

Accepted Answer

Discretionary fiscal policy refers to deliberate changes made by the government in taxation or government spending to achieve macroeconomic goals such as stabilizing the economy during a recession or controlling inflation. Options A, C, and D are incorrect as they do not accurately describe discretionary fiscal policy.

Question 12

Which of the following would be considered a fiscal policy action?
A) A city changes its rates of land tax.
B) A federal government creates a subsidy for hybrid cars to encourage the purchase of fuel-efficient cars.
C) Foreign aid is given to Indonesia.
D) A tax cut is designed to stimulate spending during an economic contraction.

Accepted Answer

A tax cut designed to stimulate spending during an economic contraction is an example of fiscal policy action. It involves government intervention in the economy through changes in taxation or government spending to stabilize the economy. Choices A, B, and C are examples of other types of government actions that are not considered fiscal policy actions.

Question 13

The largest source of revenue for the Australian federal government is ________.
A) personal income tax
B) company and petroleum resource tax
C) petrol excise
D) superannuation tax

Accepted Answer

Personal income tax is the largest source of revenue for the Australian federal government as it contributes to approximately 50% of the total revenue. Company and petroleum resource tax, petrol excise, and superannuation tax also contribute to the government revenue, but their contributions are relatively smaller.

Question 14

The increase in revenue taxation received by the government during an economic boom is due to discretionary fiscal policy.

Accepted Answer

The increase in revenue taxation during an economic boom is mainly due to automatic stabilizers, which lead to an increase in tax revenues as incomes rise. Discretionary fiscal policy refers to deliberate changes in government spending and taxation, which are usually implemented to stabilize the economy during a downturn, rather than to boost revenue during a boom.

Question 15

Government purchases and transfer payments are included in the measure of government expenditures.

Accepted Answer

Both government purchases and transfer payments are considered government expenditures and are included in the calculation of the government expenditure component of Gross Domestic Product (GDP). Government purchases refer to the goods and services that the government buys from businesses, while transfer payments are payments made to individuals or other levels of government without receiving any goods or services in return. Examples of transfer payments include Social Security, unemployment benefits, and agricultural subsidies.

Question 16

An 'automatic stabiliser' is _________.
A) a policy for growth of an economy where the current account of the balance of payments is kept in balance
B) a monetary or fiscal policy that aims to smooth out the business cycle
C) the tendency for inflation to fall as unemployment rises
D) a tax or form of government expenditure that has the effect of reducing the size of business cycle fluctuations

Accepted Answer

An automatic stabiliser is a tax or government expenditure that reduces the size of business cycle fluctuations by increasing or decreasing its own amount as the economy moves through different phases of the business cycle. For example, during a recession, incomes fall which decreases the tax revenue the government receives from individuals and businesses. However, during the same time, government expenditure on unemployment insurance and social welfare programs increase. Thus, the net effect is a stabilisation of the economy.

Question 17

In 2015/2016,the largest share of Australian federal government welfare payments went to __________.
A) unemployment benefits
B) age pensions and services to the aged
C) disability pensions and expenditures
D) payments to families with children

Accepted Answer

According to data from the Australian Institute of Health and Welfare, in the 2015/2016 financial year, the largest share of federal government welfare payments in Australia went to age pensions and services to the aged, accounting for 38% of all welfare payments. Disability pensions and expenditures were the second largest recipient with 21%, followed by payments to families with children at 19%, and finally, unemployment benefits at 6%.

Question 18

A deliberate policy change in taxes and government spending to influence the level of aggregate demand is called __________.
A) an automatic stabiliser
B) discretionary fiscal policy
C) a fiscal deficit
D) a fiscal surplus

Accepted Answer

Discretionary fiscal policy refers to deliberate changes in government taxes and spending that are aimed at influencing the level of aggregate demand. Automatic stabilizers refer to automatic changes in government spending and taxation that automatically push the economy toward equilibrium in response to changes in economic conditions. Fiscal deficit refers to a situation where government spending exceeds revenue, and fiscal surplus refers to a situation where government revenue exceeds spending.

Question 19

'Fiscal policy' refers to the _________.
A) government's ability to regulate the functioning of financial markets
B) policy by the Reserve Bank of Australia to affect the cash rate
C) techniques used by firms to reduce their tax liability
D) spending and tax policies used by the government to influence the level of economy activity

Accepted Answer

Fiscal policy refers to the government's use of spending and taxation policies to influence the level of economic activity in the country. It is one of the tools in the government's economic policy arsenal. Option A is incorrect because financial market regulation falls under the purview of financial regulators and not fiscal policy. Option B is incorrect because the Reserve Bank of Australia's policy concerning the cash rate is monetary policy, not fiscal policy. Option C is incorrect because firms' tax liability has nothing to do with fiscal policy, as they are subject to taxation laws and regulations.

Question 20

Federal government expenditure as a proportion of GDP in Australia between 1980 and 2010 has varied between _________.
A) 8 per cent and 12 per cent
B) 15 per cent and 20 per cent
C) 22 per cent and 28 per cent
D) 40 per cent and 45 per cent

Accepted Answer

Federal government expenditure in Australia during this period typically ranged between 22% and 28% of GDP.

Quiz 18: Fiscal Policy

Which of the following does not function as an automatic stabiliser?

'Fiscal policy' (discretionary fiscal policy) is defined as changes in federal and to achieve macroeconomic objectives such as price stability,healthy rates of economic growth,and high employment.

Which of the following is an example of discretionary fiscal policy?

Which of the following is an automatic stabiliser?

Active changes in tax and spending by government intended to smooth out the business cycle are called ,and changes in taxes and spending that occur passively over the business cycle are called .

Which of the following is a government 'expenditure' and not a government 'purchase'?

Government expenditure in Australia as a percentage of GDP has consistently trended upward since the 1960s.

During which decade was government expenditure in Australia the highest as a proportion of GDP?

What is 'fiscal policy' and who is responsible for fiscal policy? _ _

In 2015/2016,after social security and welfare payments,which of the following is the second largest category of Australian federal government expenditures at nearly 16 per cent of the total?

Discretionary fiscal policy is when _________.

Which of the following would be considered a fiscal policy action?

The largest source of revenue for the Australian federal government is ________.

The increase in revenue taxation received by the government during an economic boom is due to discretionary fiscal policy.

Government purchases and transfer payments are included in the measure of government expenditures.

An 'automatic stabiliser' is _________.

In 2015/2016,the largest share of Australian federal government welfare payments went to __________.

A deliberate policy change in taxes and government spending to influence the level of aggregate demand is called __________.

'Fiscal policy' refers to the _________.

Federal government expenditure as a proportion of GDP in Australia between 1980 and 2010 has varied between _________.

Quiz 18: Fiscal Policy

Which of the following does not function as an automatic stabiliser?

'Fiscal policy' (discretionary fiscal policy) is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability,healthy rates of economic growth,and high employment.

Which of the following is an example of discretionary fiscal policy?

Which of the following is an automatic stabiliser?

Active changes in tax and spending by government intended to smooth out the business cycle are called ________,and changes in taxes and spending that occur passively over the business cycle are called ________.

Which of the following is a government 'expenditure' and not a government 'purchase'?

Government expenditure in Australia as a percentage of GDP has consistently trended upward since the 1960s.

During which decade was government expenditure in Australia the highest as a proportion of GDP?

What is 'fiscal policy' and who is responsible for fiscal policy? _____________________________________________________________________________________________ _____________________________________________________________________________________________

In 2015/2016,after social security and welfare payments,which of the following is the second largest category of Australian federal government expenditures at nearly 16 per cent of the total?

Discretionary fiscal policy is when _________.

Which of the following would be considered a fiscal policy action?

The largest source of revenue for the Australian federal government is ________.

The increase in revenue taxation received by the government during an economic boom is due to discretionary fiscal policy.

Government purchases and transfer payments are included in the measure of government expenditures.

An 'automatic stabiliser' is _________.

In 2015/2016,the largest share of Australian federal government welfare payments went to __________.

A deliberate policy change in taxes and government spending to influence the level of aggregate demand is called __________.

'Fiscal policy' refers to the _________.

Federal government expenditure as a proportion of GDP in Australia between 1980 and 2010 has varied between _________.

'Fiscal policy' (discretionary fiscal policy) is defined as changes in federal and to achieve macroeconomic objectives such as price stability,healthy rates of economic growth,and high employment.

Active changes in tax and spending by government intended to smooth out the business cycle are called ,and changes in taxes and spending that occur passively over the business cycle are called .

What is 'fiscal policy' and who is responsible for fiscal policy? _ _