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AP Macroeconomics Government Budgets and Fiscal Policy — practice questions

Explore 22 free Government Budgets and Fiscal Policy questions in AP Macroeconomics Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Government Budgets and Fiscal Policy questions and exercises with answers

Showing questions 1–22 of 22.

When the federal government spends more money than it receives in taxes in a year, it runs a:Read the answer and worked solution →When the government receives more money in taxes than it spends in a year, it runs a:Read the answer and worked solution →If government spending and taxes are equal, the government has a:Read the answer and worked solution →The income tax is described as which kind of tax?Read the answer and worked solution →A progressive tax means the tax rates do what as a household's income increases?Read the answer and worked solution →The Medicare payroll tax is described as which kind of tax?Read the answer and worked solution →A regressive tax means people with higher incomes pay a share of their income that is:Read the answer and worked solution →The Social Security payroll tax is proportional only up to which point?Read the answer and worked solution →A tax imposed on a particular good, such as gasoline or tobacco, is called an:Read the answer and worked solution →Which taxes are described as providing smaller shares of federal revenue?Read the answer and worked solution →Discretionary fiscal policy occurs when the government passes a new law that explicitly changes:Read the answer and worked solution →Expansionary fiscal policy is described as shifting aggregate demand in which direction?Read the answer and worked solution →Contractionary fiscal policy is described as shifting aggregate demand in which direction?Read the answer and worked solution →The very large budget deficit in 2009 is attributed to a combination of discretionary policy and:Read the answer and worked solution →The standardized employment deficit is described as eliminating the impact of:Read the answer and worked solution →A tax that is proportional at low incomes but regressive above a wage limit describes the:Read the answer and worked solution →An economy in recession would call for which kind of fiscal policy under the aggregate demand model?Read the answer and worked solution →Pull the rope to the right policyRead the answer and worked solution →Sort the taxes by typeRead the answer and worked solution →Stack the budget termsRead the answer and worked solution →Match each fiscal termRead the answer and worked solution →Complete the fiscal rulesRead the answer and worked solution →

Worked practice questions

When the federal government spends more money than it receives in taxes in a year, it runs a:

  1. Budget deficit
  2. Budget surplus
  3. Balanced budget
  4. Trade surplus
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Correct answer: A. Budget deficit

1. The budget balance depends on which side is larger. 2. Government receives money in taxes and pays out in spending. 3. When it spends more money than it receives in taxes, it runs a budget deficit. 4. The opposite case gives a surplus. _Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 16 'Government Budgets and Fiscal Policy'_

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When the government receives more money in taxes than it spends in a year, it runs a:

  1. Trade deficit
  2. Budget surplus
  3. Budget deficit
  4. Balanced budget
Show answer and solution

Correct answer: B. Budget surplus

1. A surplus is the mirror image of a deficit. 2. Spending more than it receives gives a budget deficit. 3. When the government receives more money in taxes than it spends, it runs a budget surplus. 4. Equal spending and taxes give a balanced budget. _Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 16 'Government Budgets and Fiscal Policy'_

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If government spending and taxes are equal, the government has a:

  1. Balanced budget
  2. Budget deficit
  3. Budget surplus
  4. Growing debt
Show answer and solution

Correct answer: A. Balanced budget

1. There is a third case between deficit and surplus. 2. Spending above taxes gives a deficit and taxes above spending give a surplus. 3. If government spending and taxes are equal, it has a balanced budget. 4. Neither side then dominates. _Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 16 'Government Budgets and Fiscal Policy'_

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