4.4.4 Fiscal Policy Tools

• What are the two main levers the government can use to influence the economy in fiscal policy?

  Government spending and taxation
• Fiscal policy tools are adjusted to achieve macroeconomic objectives such as economic growth and low inflation.


  True
• Match the tax type with its definition:

  Direct Taxes ↔️ Levied on income or wealth

  Indirect Taxes ↔️ Levied on goods and services
• What does government expenditure include spending on?

  Public services, social welfare, defense
• Increasing government expenditure can help reduce inflation.

  False
• Fiscal policy aims to achieve macroeconomic objectives like economic growth, low inflation, and full employment
• What are the two main fiscal policy tools available to the government?

  Government spending and taxation
• Higher government spending on infrastructure improves productivity in the long run.


  True
• Income tax is an example of a direct tax, which is levied on an individual's or business's income, profits, or wealth
• What are the four main categories of government expenditure?

  Public services, social welfare, defense, debt servicing
• Increasing government spending can stimulate the economy by boosting demand.

  True
• Government spending is the amount the government spends on public services, infrastructure, and social welfare
• What are the two main types of taxes used as fiscal policy tools?

  Direct and indirect taxes
• Indirect taxes are levied on the purchase of goods and services
• Order the steps in how changes in government expenditure impact the economy:

  1️⃣ Government increases spending

  2️⃣ Demand in the economy rises

  3️⃣ Economic activity increases
• What are the two main fiscal policy tools available to the government?

  Government spending and taxation
• Match the fiscal policy tool with its economic impact:

  Government Spending ↔️ Stimulates demand and growth

  Taxation ↔️ Impacts consumer spending
• Increasing government spending boosts demand in the economy, which can stimulate economic growth and employment
• How does government spending influence the economy?

  Stimulates economic activity
• Match the type of tax with its example:

  Direct Tax ↔️ Income tax

  Indirect Tax ↔️ VAT

  Corporate Tax ↔️ Profit tax
• Increasing government expenditure boosts demand and economic activity, while decreasing it can help reduce inflation.
• What macroeconomic objectives does fiscal policy aim to achieve?

  Economic growth, low inflation, full employment