Practice Questions
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What is the main purpose of fiscal policy in relation to government budget deficits?
Fiscal policy helps the government decide how much money to collect and spend. Other options are incorrect because Some might think fiscal policy is a...
How can government budget deficits impact inflation in an economy?
When the government spends more money than it earns, it can boost demand for goods and services. Other options are incorrect because Some might think ...
How does an economic recession typically influence government borrowing and budget deficits?
During a recession, people spend less money. Other options are incorrect because Some might think the government cuts borrowing during tough times; It...
Which of the following strategies is most effective in addressing a government budget deficit that has arisen primarily due to cyclical factors?
Implementing counter-cyclical fiscal policies helps the economy during tough times. Other options are incorrect because Some think raising taxes on we...
How does an increase in government budget deficits affect national debt, inflation, and economic recession?
When the government spends more than it earns, it borrows money. Other options are incorrect because This option suggests that deficits decrease natio...
What is a government budget deficit?
A budget deficit happens when a government spends more money than it gets from taxes and other income. Other options are incorrect because This option...
What is the main purpose of fiscal policy in relation to government budget deficits?
Fiscal policy helps the government decide how much money to collect and spend. Other options are incorrect because Some might think fiscal policy is a...
How can government budget deficits impact economic growth?
When the government spends more money than it earns, it can boost the economy. Other options are incorrect because Some people think that deficits alw...
If the economy is in a recession and the government does not take any discretionary policy actions, what is likely to happen to the budget balance?
During a recession, people earn less money. Other options are incorrect because Some might think that spending goes down during a recession; It's a co...
During a recession, the government finds that its tax revenues have significantly decreased while its welfare and unemployment payments have increased. Given this scenario, what is the most likely immediate impact on the government budget, and what fiscal policy response might be necessary to address this situation?
When the government collects less money from taxes and spends more on support programs, it spends more than it earns. Other options are incorrect beca...
When a government experiences a recession without any discretionary policy action, it is likely to move into a ________, as expenditures typically exceed revenues due to rising transfer payments and declining tax revenues.
A deficit happens when a government spends more money than it earns. Other options are incorrect because A surplus means the government has more money...
During a recession, if the government does not implement any discretionary measures, what is the likely impact on the budget balance?
During a recession, people earn less money, so they pay less in taxes. Other options are incorrect because Some might think that spending goes down du...
Which of the following statements accurately describe the implications of government budget deficits during an economic recession? Select all that apply.
Other options are incorrect because Many think deficits go up because the government spends more; Some believe that having a deficit will reduce natio...
Order the following components in the sequence they would typically influence a government's budget during an economic recession: A) Increased transfer payments, B) Decreased tax revenues, C) Rising government debt, D) Potential fiscal policy actions (like spending cuts or tax increases).
During a recession, people earn less money, so tax revenues drop first. Other options are incorrect because This option suggests that increased paymen...
During a recession, how is a government's budget likely to be affected without any policy changes?
During a recession, people earn less money. Other options are incorrect because Some might think that more spending helps the budget; It's a common be...
Government budget deficits are to increased debt as a household's overspending is to what?
When a household spends more than it earns, it can lead to financial strain. Other options are incorrect because Some might think overspending leads t...
During an economic recession, which of the following scenarios is most likely to lead to a government budget deficit?
When more people are unemployed, the government pays more in unemployment benefits. Other options are incorrect because Some might think that more spe...
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