During 2020, the Australian economy experienced its first recession in almost 30 years. With respect to fiscal policy, the cyclical component of the budget helped to:
Decrease of the budget deficit and increase the rate of economic growth
Decrease the budget deficit and slow the rate of decline in economic growth
Increase the budget deficit and increase economic growth
Increase the budget deficit and slow the rate of decline in economic growth
During a period of strong growth in economic activity (eg a Boom), the cyclical component of the budget can help to reduce the rate of growth because
average incomes rise, income earners move into higher tax brackets and pay proportionally more tax than before, which causes a decrease in spending
more tax is collected by governments and therefore spending (consumption) slows down
more tax is collected by governments and therefore spending (consumption) decreases
average incomes rise, income earners move into higher tax brackets and pay proportionally more tax than before, which causes a slow down in spending
An actual budget surplus will be bigger than an estimated budget surplus when
Economic growth is higher than that forecast at Budget time
Economic growth is lower than that forecast at Budget time
There is an increase in economic growth
There is an increase in the terms of Trade
When determining whether a particular budget is expansionary or contractionary, it is necessary to examine
The actual budget outcome (eg a deficit or surplus)
The change in the budget outcome from the previous year
specific initiatives that are implemented in the budget
All of the above
Which of the following is least likely to be indicative of an expansionary budgetary policy
A budget deficit of $2B that includes $1.5B of expenditure on initiatives designed to improve the safety of Australian workplaces
A budget deficit of $2B that includes $1B of expenditure on global warming initiatives
A budget deficit of $2B that includes $1.6Bm on wage subsidy support for businesses
A budget deficit of $2B that includes $1.6Bm of untied foreign aid
Which of the following best describes fiscal drag or bracket creep
Increases in inflation causing a rise in real wages and a corresponding increase in the government's fiscal outcome
Increases in inflation causing a rise in nominal wages which push income earners into tax brackets and resulting in an increase in government expenditure and a fall in the deficit
Increases in inflation causing a rise in nominal wages which push income earners into higher tax brackets and resulting in an increase in government tax income and a rise in the deficit
Increases in inflation causing a rise in nominal wages which push income earners into higher tax brackets and resulting in an increase in government tax income and a rise in the surplus
It is possible to argue that a surplus budget can have expansionary effects on the economy in the longer term because
a surplus budget increases consumer confidence and AD
A surplus budget can reduce pressure on interest rates, resulting an increase in Consumption and Investment over time and boosting AD
A surplus budget can increase pressure on interest rates, resulting a decrease in inflationary pressure and increase AD
A surplus budget can reduce pressure on interest rates, resulting in capital inflow which boosts Investment and AD
Which of the following best describes how financially responsible governments will operate budgetary policy
To achieve ongoing surplus budgets regardless of changes in the business cycle
To operate budget surpluses for such a time as the Australian government's net wealth is consolidated
To achieve a budget surplus when growth is strong and a budget deficit when growth is weak, but to achieve surpluses on average over the course of the economic cycle
To achieve budget balance every year regardless of changes in the business cycle
Which of the following is least likely to be considered a budgetary policy initiative that is designed to increase aggregate supply in the economy
Measures to increase the population via skilled immigration
An increase in child care funding
Increased expenditure on education and training
Increased expenditure on welfare and support for the unemployed
Which of the following is least likely to be a budgetary policy initiative that is designed to increase the size of the labour force?
Changes in superannuation laws that allow older workers to access their superannuation whilst still in the workforce
Increased family tax benefits for families using child care services
Increased funding for aid to less developed economies