Managerial Economics through taxation.

18. Is a mandatory financial charge or some

FISCAL POLICY other type of levy imposed upon taxpayer?
19. Refers to the deliberate manipulation of
taxes and government spending the congress
I. Multiple Choice to alter real domestic output and
employment, control inflation and stimulate
A. Expansionary Fiscal Policy
economic growth.
B. Neutral Fiscal Policy
20. It is detailed plan of operations for some
C. Contractionary Fiscal Policy
specific future period.

III. TRUE OR FALSE

1. Reduce government spending
21. Fiscal Policy refers to the use of
2. Slows down the economy
government revenue collection and
3. Raise taxes
expenditure to influence the economy.
4. Increase government expenditure
22. There are three types of Fiscal Policy;
5. Overall budget has a neutral effect on
Expansionary, Neutral and Contractionary
level of economic activity
23. When the government changes the levels
6. Meant to make the economy expand
of taxation and government spending, it
7. Higher demand
influences aggregate demand and the level
8. Government spending=taxes
of economic activity.
9. Eliminate the effects of inflation
24. Expansionary Fiscal Policy involves
10. Prevents recession
increasing taxes and decreasing government
II. IDENTIFICATION spending.
25. When Aggregate Demand decreases, it
11. Is also known as "budgetary policy". shows economic growth.
12. Refers to various ongoing programs of 26. Contractionary Fiscal Policy involves
government spending and taxation. decreasing taxes and increasing government
13. The amount by which the government spending.
income exceeds its spending. 27. Non-Discretionary Fiscal Policy refers to
14. Is an amount that is spent for an expense the policy that represents those changes in
that will be matched immediately with the government spending and taxation that
revenues reported on the current period's needs a specific approval from Congress.
income statement? 28. Aggregate Demand = Consumer +
15. Means the changes are the option of the Income + Government Spending + Net
federal government. Exports
16. Means the total government expenditure 29. Discretionary Fiscal Policy does not
is more than government receipts. require any type of bill to be passed for it.
17. Involves the decisions that a government Examples are Welfare program.
makes regarding with collection of revenue, 30. Aggregate demand is the total level of
demand for desired goods and services that D: the aggregate supply curve should be
makes up Gross National Product. shifted to the right

IV. MULTIPLE CHOICE 5.) Stagflation happens when

A: inflation and unemployment both rise
1.)To remedy inflation, the appropriate B: inflation rises and unemployment falls
fiscal policy is to have C: inflation falls and unemployment rises
A: increased taxes and government spending D: inflation and unemployment both fall
B: decreased taxes and government 6.) A fiscal deficit occurs when
spending A: imports exceed exports
C: increased taxes and decreased B: exports exceed imports
government spending C: tax revenues exceed spending
D: decreased taxes and increased D: spending exceeds tax revenues
government spending
7.) Which of these is not an automatic
2.) To remedy recession, the best fiscal stabilizer?
policy would be to call for A: Income taxes
A: increased taxes and government spending B: unemployment benefits
B: decreased taxes and government C: stimulus package
spending D: food stamps
C: increased taxes and decreased
government spending 8.) What is Fiscal Policy?
D: decreased taxes and increased A: Policy that seeks to expand the money
government spending supply to encourage economic growth
B: A finance ministry to slow down an
3.) To close an expansionary gap economy
A: the aggregate demand curve should be C: A government policy for dealing with the
shifted to the left budget
B: the aggregate demand curve should be
shifted to the right 9.)What is Expansionary Policy?
C: the aggregate supply curve should be A: Policy that seeks to expand the money
shifted to the left supply to encourage economic growth
D: the aggregate supply curve should be B: A government policy for dealing with the
shifted to the right budget
C: A finance ministry to slow down an
4.) To close a recessionary gap economy
A: the aggregate demand curve should be
shifted to the left 10.) What would the government do if it
B: the aggregate demand curve should be wants to use an Expansionary Policy?
shifted to the right A: Increase GDP, increase taxes. they're
C: the aggregate supply curve should be worried about inflation
shifted to the left B: Lower taxes and are worried about gov't
spending Individual tax and cooperative tax are
C: Decrease taxes and decrease GDP example of direct tax.
D: Increase gov't spending
7. Government's budget is the difference
V. Choices: A - if both statement is true; between what is spends (G) and what it
B - if both statement is false; C -if only collects in taxes (T) in a given period.
first statement is true; D - if only second
statement is true. Budget is a detailed plan of operations for
some specific present period.
1. Deficit means the total government
expenditure is less than the government 8. Service tax, custom duty and central sales
receipts. tax are example of indirect tax.

Internal Borrowings are borrowings from Public expenditure is spending made by

the central bank.2. An amount by which the the government of a country on collective
government income exceeds its spending is needs and wants.
called budget surplus. Taxation is a 9. An amount that is spent for an expense
mandatory financial charge or some other that will be matched immediately with the
type of levy imposed upon a taxpayer. revenues reported on the current period's
3. Expenses in improving land, buildings, income statement is revenue expenditure.
and vehicles are example of revenue Borrowings from the public means of
expenditure. treasury bills and government bonds is
Public expenditure include infrastructure internal borrowings.
expenditure and revenue expenditure. 10. Public expenditure includes
4. VAT is an indirect tax which equivalent infrastructure expenditure and revenue
to 12%. expenditure.

Budget is detailed plan of operation for Deficit means the total government
present period. expenditure is less than the government
receipts
5. Revenue expenditure is an amount spent
to acquire or significantly improve the
capacity or capabilities of a long-term asset. Answer key:
External borrowings are borrowings in I.
international organization like World Bank
and IMF. 1. C

6. Instrument of Fiscal Policy are Budget, 2. C

Taxation, Public expense and Public fund.
3. C
 4. A 7. F

5. B 8. F

6. A 9. F

7. A 10. T

8. B IV.

9. C 1. C

10. A 2. D

II. 3. A

1. Fiscal policy 4. B

2. Non- discretionary policy 5. A

3. Budget surplus 6. D

4. Revenue expenditure 7. C

5. Discretionary policy 8. C

6. Deficit 9. A

7. Fiscal policy 10. B

8. Taxation V.

9. Descretionary policy 1. D

10. Budget 2. A

III. 3. B

1. T 4. C

2. F 5. D

3. T 6. B

4. F 7. C

5. F 8. A

6. F 9. A
10. B
ANSWER KEY: 40. B

1. C 41.
2. C
3. C
4. A
5. B
6. A
7. A
8. B
9. C
10. A
11. FISCAL POLICY
12. NON-DISCRETIONARY POLICY
13. BUDGET SURPLUS
14. REVENUE EXPENDITURE
15. DISCRETIONARY POLICY
16. DEFICIT
17. FISCAL POLICY
18. TAXATION
19. DISCRETIONARY POLICY
20. BUDGET
21. T
22. F
23. T
24. F
25. F
26. F
27. F
28. F
29. F
30. T
31. C
32. D
33. A
34. B
35. A
36. D
37. C
38. C
39. A