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Homework answers / question archive / Two and Seven, indicate whether each of these statements is true T, false F, or ‘it depends' #
Two and Seven, indicate whether each of these statements is true T, false F, or ‘it depends' #. E.g. highlight your selection: T F #. Or T F #. Explain why each is true or false, or in what significant circumstances it is true and/or in which significant circumstances it is false. Set One [6 marks] Consider these graphs: Australian Government Budget Balance* Per cent of nominal GDP % State Budget Balances* Per cent of nominal GDP % % % 1.0 1.0 0.01 0.0 0.5 0.5 -2.5 -2.5 0.0 0.0 -5.0 -5.0 -0.51 -0.5 -7.5 -7.5 -1.0 -1.0 - 10.0 20/21 1-1.5 18/19 04/05 11/12 -10.0 85/86 92/93 99/00 06/07 13/14 Underlying cash balance; 2020 July economic and fiscal update Source: Australian Treasury -1.5 83/84 90/91 97/98 Underlying cash balance Source: ABS i) The graphs above show that governments create fluctuations (or cycles) by running fiscal surpluses and then deficits. Indicate TF # Explanation: [Limit 40 words: 2 marks] ii) Fiscal demand-stimulus in Australia today would be greater for a total tax cut of $1b.to low-income earners than a total tax cut of $1b. for high- income earners. Indicate TF # Explanation: [Limit 40 words: 2 marks] iii) In short-run equilibrium, leakages equal injections. So T=G and the budget is balanced. Indicate TF # Explanation: (Limit 40 words: 2 marks]
Q(i)
(Ans) F
Explanation : The fluctuations (or cycles) started because governments incurred fiscal deficits first and then surpluses. The negative sign shows the deficit.
Q(ii)
(Ans) T
Explanation: It is because the impact of the tax cut to low income earners will increase their purchasing power and saving. In this pandemic due to increase in their income because of tax cut low income earners will spend mostly on health and balanced diet.
Q(iii)
(Ans) #
Explanation: It depends upon the fiscal policy of the government. If the government borrows money to spend then the gap can be filled. Otherwise, government can choose contractionary fiscal policy.
