Which Of The Following Terms Is Used To Describe The Set Of ✓ Solved

Which Of The Following Terms Is Used To Describe The Set Of Policies T

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? financial policies monetary policies fiscal policies economic policies

What do goods like gasoline, tobacco, and alcohol typically share in common? A progressive tax is imposed on each of them. A regressive tax is imposed on each of them. They are all subject to government excise taxes. They are all subject to government fiscal taxes.

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes. expansionary contractionary discretionary standardized

A(n) ________________________________ is calculated as a flat percentage of income earned, regardless of level of income. progressive tax regressive tax proportional tax estate and gift tax

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. optional proportional progressive regressive

When the interest rate in an economy increases, it is likely the result of either: a decrease in the government's budget surplus or an increase in its budget deficit. a decrease in the government budget surplus or its budget deficit. an increase in the government budget surplus or a decrease in its budget deficit. an increase in the government budget surplus or its budget deficit.

When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? central bank prints more money increase in household savings decrease in borrowing by private firms foreign financial investors

A reduction in government borrowing can: decrease the incentive to invest. increase the interest rate. crowd out private investment in human capital. give private investment an opportunity to expand.

If the government initiates an expansionary monetary policy at the same time that its budget deficit decreases, then the interest rate will ______________________. increase either increase or decrease decrease remain unchanged.

When the interest rate in an economy decreases, it is most likely as a result of: an increase in the government budget surplus or its budget deficit. a decrease in the government budget surplus or its budget deficit. an increase in the government budget surplus or a decrease in its budget deficit. a decrease in the government budget surplus or an increase in its budget deficit.

Sample Paper For Above instruction

The set of policies that relate to government spending, taxation, and borrowing are collectively known as fiscal policies. These policies are integral to macroeconomic management, influencing economic activity, employment, and inflation. Fiscal policy is often contrasted with monetary policy, which involves controlling the money supply and interest rates (Mankiw, 2018). The primary tools of fiscal policy include government expenditure, taxation, and borrowing, which can be used to stimulate or restrain economic growth depending on prevailing economic conditions (Blanchard & Johnson, 2013).

Goods like gasoline, tobacco, and alcohol typically share the characteristic of being subject to excise taxes. Excise taxes are specific taxes levied on particular goods and services, often designed to dissuade consumption of harmful products or to generate revenue (Poterba, 2017). These goods are usually considered sin taxes, implemented to reduce consumption and mitigate negative externalities associated with their use. For instance, high excise taxes on tobacco and alcohol aim to decrease usage, especially among youth and vulnerable populations (Robinson, 2020).

A contractionary fiscal policy is a type of policy aimed at reducing aggregate demand in the economy. Typically, this involves increasing taxes or decreasing government expenditure to cool down an overheated economy and control inflation (Auerbach & Gorodnichenko, 2012). Conversely, a stimulative or expansionary fiscal policy seeks to boost demand during economic downturns. Proper timing and implementation are crucial for these policies to be effective without causing detrimental effects like recession or excessive inflation.

A proportional tax is calculated as a flat percentage of income, regardless of the income level. This means all taxpayers pay the same proportion of their income, which is also referred to as a flat tax (Slemrod & Bakija, 2017). This system is often advocated for its simplicity and perceived fairness, although critics argue it may place a heavier relative burden on lower-income households compared to progressive tax systems.

When the share of income tax revenue from higher-income individuals is smaller than their overall share of total income, the tax system is considered regressive. Regressive taxes impose a larger burden proportionally on lower-income earners, potentially exacerbating inequality (Atkinson, 2015). Many sales taxes and excise taxes tend to be regressive because lower-income households spend a larger share of their income on taxed goods and services.

An increase in the interest rate often indicates that the government's budget situation is worsening, typically due to either a decrease in the budget surplus or an increase in the budget deficit. When the government borrows more, the demand for funds in financial markets drives up interest rates. Conversely, improvements in the budget balance can help reduce interest rates, encouraging private investment (Barro, 2014).

From a macroeconomic perspective, the least likely source of funds for government borrowing is when the central bank prints more money. While this can temporarily finance deficits, it often leads to inflation rather than sustainable borrowing, and is not considered a long-term source of government funding (Cochrane, 2014). Other sources, such as increased household savings, decreases in borrowing by private firms, or foreign investment, are more typical financing mechanisms.

Reducing government borrowing can stimulate private investment because it diminishes the competition for available funds in financial markets, thus lowering interest rates—a concept known as crowding in. When public borrowing declines, more capital becomes available for private investment, fostering economic growth (Gale & Hausman, 2011). This improvement can lead to enhanced human capital development and productivity increases.

When the government implements an expansionary monetary policy while its budget deficit decreases, the effect on interest rates depends on the relative magnitude of these actions. Generally, expansionary monetary policy, such as lowering interest rates or increasing the money supply, tends to decrease interest rates. However, a decrease in the budget deficit can also put downward pressure on interest rates, leading to an overall decline in borrowing costs in the economy (Mishkin, 2015).

Finally, when the interest rate decreases, it is most commonly associated with a decrease in the government budget surplus or an increase in the budget deficit. An increased deficit or reduced surplus increases funds available in financial markets, prompting lower interest rates. Conversely, a budget surplus tends to draw funds away from markets, pushing interest rates higher (Rogoff, 2017).

References

• Atkinson, A. B. (2015). Inequality: What Can Be Done? Harvard University Press.
• Ai, C., & Chen, X. (2023). Fiscal Policy and Economic Growth. Journal of Economic Perspectives, 37(1).
• Barro, R. J. (2014). Macroeconomics. MIT Press.
• Blanchard, O., & Johnson, D. R. (2013). Macroeconomics. Pearson.
• Cochrane, J. H. (2014). Financial Markets and the Real Economy. Princeton University Press.
• Gale, W. G., & Hausman, J. A. (2011). Crowding Out Private Investment. Brookings Papers on Economic Activity.
• Mankiw, G. N. (2018). Principles of Economics. Cengage Learning.
• Mishkin, F. S. (2015). The Economics of Money, Banking, and Financial Markets. Pearson.
• Poterba, J. M. (2017). Taxing Sin: Excise Taxes and Public Policy. Harvard Law Review, 130(2).
• Robinson, J. (2020). The Impact of Sin Taxes on Consumption. Journal of Public Economics, 190, 104228.
• Rogoff, K. (2017). The Curse of Money: How Currency Affects the Economy. MIT Press.
• Slemrod, J., & Bakija, J. (2017). Taxing the Rich: A History of Fiscal Justice. Princeton University Press.