Government Budget: A Comprehensive Guide for Economics Students

Question 1

Which of the following is NOT a type of government spending?

Accepted Answer

Tax revenue

Answer

Infrastructure projects (e.g., roads, schools)

Answer

Healthcare services

Question 2

Which of the following is NOT a fiscal policy tool used to directly influence the level of aggregate demand?

Accepted Answer

Central bank interest rate policy

Answer

Government spending

Answer

Taxation

Question 3

Evaluate the effectiveness of austerity measures in reducing government debt, considering their potential economic and social impacts.

Accepted Answer

Austerity measures can reduce government debt, but may have negative economic and social consequences.

Answer

Austerity measures are always effective in reducing government debt.

Answer

Austerity measures are ineffective in reducing government debt.

Answer

Austerity measures can reduce government debt without causing any adverse economic or social impacts.

Question 4

What are the potential consequences of a prolonged government budget deficit on a country's economic stability?

Accepted Answer

Reduced economic growth or reduced investment due to government competition with the private sector for funds

Accepted Answer

Increased public debt

Answer

Lower interest rates

Answer

Reduced inflation

Question 5

Which of the following is not categorized as a component of government revenue?

Accepted Answer

Corporate donations

Answer

Corporate taxes

Answer

Social security contributions

Question 6

Indirect taxation is a tax levied on:

Accepted Answer

Goods and services

Answer

Personal income

Answer

Property ownership

Answer

Corporate profits

Question 7

A government budget deficit occurs when:

Accepted Answer

Government expenditure is greater than revenue

Answer

Revenue is greater than government expenditure

Answer

Government borrowing decreases

Question 8

Which of the following is a potential consequence of a large public debt?

Accepted Answer

Higher interest payments

Answer

Lower inflation

Answer

Faster economic growth

Question 9

Expansionary fiscal policy involves:

Accepted Answer

Increased government spending or reduced taxes

Answer

Unchanged government spending and taxation

Answer

Reduced government spending or increased taxes

Question 10

The process of preparing and approving a government budget is known as:

Accepted Answer

Budgetary cycle

Answer

Fiscal planning

Answer

Revenue estimation

Question 11

Automatic stabilizers are fiscal policy measures that:

Accepted Answer

Respond to economic changes without legislative intervention

Answer

Are only implemented during recessions

Answer

Require government approval to be enacted

Question 12

A balanced budget amendment requires that:

Accepted Answer

Government expenditure equals revenue

Answer

Government revenue is greater than expenditure

Answer

Government expenditure is greater than revenue

Question 13

Fiscal drag refers to the impact of:

Accepted Answer

Inflation on the real value of tax revenues

Answer

Tax cuts on economic growth

Answer

Government spending on the budget deficit

Answer

Public debt on interest rates

Question 14

What occurs when government expenditure exceeds revenue?

Accepted Answer

Budget deficit

Answer

Economic growth

Answer

Inflation

Answer

Budget surplus

Question 15

Which of the following is a potential negative consequence of a large budget deficit?

Accepted Answer

Inflation

Answer

Increased economic growth

Answer

Reduced unemployment

Question 16

Which of the following is a potential negative consequence of high public debt?

Accepted Answer

Reduced economic growth

Answer

Reduced inflation

Answer

Increased foreign investment

Answer

Increased consumer spending

Question 17

What is the primary goal of fiscal policy?

Accepted Answer

To influence the economy through changes in government spending and taxation

Answer

To set interest rates

Answer

To control inflation

Question 18

Which of the following is an example of an expansionary fiscal policy measure?

Accepted Answer

Government increasing its expenditure

Answer

Government raising taxes

Answer

Government reducing its expenditure

Question 19

What is the most important factor to consider when making fiscal policy decisions?

Accepted Answer

The current state of the economy

Answer

Level of public debt

Answer

Political ideology of the government

Answer

Opinions of economists

Question 20

What is the fundamental difference between public sector and private sector borrowing?

Accepted Answer

Public sector borrowing is backed by the government, while private sector borrowing is not

Answer

Private sector borrowing is more expensive than public sector borrowing

Answer

Public sector borrowing is less risky than private sector borrowing

Question 21

Which of the following is NOT a component of government revenue?

Accepted Answer

Borrowing

Answer

Taxation

Answer

Pensions

Answer

Fees and charges

Question 22

Government expenditure that is intended to provide essential services to citizens is known as:

Accepted Answer

Public goods

Answer

Subsidies

Answer

Public investment

Answer

Transfer payments

Question 23

A government budget deficit occurs when:

Accepted Answer

Total government expenditure exceeds total government revenue

Answer

Total government revenue exceeds total government expenditure

Answer

The government debt has increased

Answer

Government spending equals zero

Question 24

The primary objective of government budget management is to:

Accepted Answer

Stabilize the economy

Answer

Reduce government debt

Answer

Balance the budget

Answer

Maximize revenue

Question 25

Which of the following is a fiscal policy tool used to stimulate economic growth?

Accepted Answer

Tax cuts

Answer

Interest rate increases

Answer

Spending cuts

Answer

Exchange rate devaluation

Question 26

The national debt represents the cumulative total of:

Accepted Answer

Budget deficits

Answer

Total government expenditure

Answer

Government revenue

Answer

Budget surpluses

Question 27

One of the potential benefits of government borrowing is:

Accepted Answer

Financing infrastructure projects

Answer

Increasing the money supply

Answer

Controlling exchange rates

Answer

Reducing inflation

Question 28

Which of the following is a method used to estimate the potential economic impact of government budget changes?

Accepted Answer

Econometric modelling

Answer

Opinion polls

Answer

Focus groups

Answer

Time series analysis

Question 29

What is the term used to describe the situation when government expenditure exceeds government revenue?

Accepted Answer

Budget deficit

Answer

Budget surplus

Answer

Fiscal surplus

Answer

Current account deficit

Question 30

Which of the following is a potential consequence of persistent budget deficits?

Accepted Answer

Increased public debt and higher interest rates

Answer

Increased foreign investment

Answer

Lower inflation

Answer

Higher economic growth

Question 31

What is the primary purpose of fiscal policy?

Accepted Answer

To influence the level of economic activity and achieve macroeconomic objectives

Answer

To control the money supply

Answer

To raise revenue for the government

Question 32

What is a key advantage of using fiscal policy over monetary policy to stimulate economic growth?

Accepted Answer

Fiscal policy can be targeted at specific sectors or regions

Answer

Fiscal policy is less likely to cause inflation

Answer

Fiscal policy is more effective in the short-term

Question 33

What is the term used to describe the automatic stabilizers that help to reduce the impact of economic fluctuations on the government budget?

Accepted Answer

Built-in stabilizers

Answer

Discretionary stabilizers

Answer

Structural stabilizers

Answer

Keynesian stabilizers

Question 34

Which of the following is NOT a potential benefit of a balanced budget?

Accepted Answer

Higher economic growth

Answer

Improved investor confidence

Answer

Lower inflation

Answer

Reduced government debt