Discretionary fiscal policy refers to Select one a any chang

Discretionary fiscal policy refers to:

Select one:

a. any change in government spending or taxes made by the President on Twitter.

b. changes in money supply and interest rates made by the President.

c. the changes in taxes and transfers that occur automatically as GDP changes.

d. changes in taxes and government expenditures made by Congress to stabilize the economy.

The major source of tax revenue for the Federal government is:

Select one:

a. property taxes.

b. sales and excise taxes.

c. corporate income taxes.

d. personal income taxes.

e. inheritance taxes.

A tax whose average rate is increasing as the amount taxed increases is:

Select one:

a. congressive  

b. revenue neutral  

c. aggressive

d. progressive

e. regressive

Public debt is the:

Select one:

a. total of all past deficits minus all past surpluses.

b. total household and corporate debt

c. ratio of all past deficits to all past surpluses.

d. difference between current government expenditures and revenues.

One of the potential problems with the public debt is that it may:

Select one:

a. decrease interest rates and increase investment spending.

b. increase the debt burden of foreign creditors.

c. lead to added taxes that reduce economic incentives.

d. make income distribution more equitable.   

Solution

Q1. Discretionary fiscal policy is carried out by the government to stabilize the economy wih the help of tax and government expenditure. It can increase government expenditure (or lower taxes) to increase the output in the economy and decrease the expenditure(or raise taxes) to reduce the output. So (d) is correct.

Q3. In the case of progressive taxes, increase in taxable income raises the average tax rate. So (d) is correct.

Q4. Public debt is the difference between current government expenditures and revenues. So (d) is correct.

Q5. Due to higher public debt, government will try to increase its revenue to pay off its debt. Government will raise revenues through increase in taxes which in turn will not be liked by many. So (c) is correct.