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Unit 3.5 and 3.6 review sheet

Review of terms for unit 3.5 and 3.6: Fiscal and monetary policy

I have included this page, which contains a PDF handout as a simple revision exercise.  I find that many IB students get a degree of comfort from these short summary handouts.

1. Complete the following sentences by filling in the missing words:

The government budget is derived from government income from and sales of     minus total , including debt interest payments.

fiscal  public  growth  debt  expenditures  assets  taxation 

 

 

2. Complete the following sentences by filling in the missing words:

     refers to the use of government     and     policies to influence economic conditions, including demand for goods and services, employment, inflation and economic  

Fiscal  spending  growth  debt  policy  assets  tax 

 

 

3. Complete the following sentences by filling in the missing words:

A     occurs when government income from taxation and sales of public  is than its total expenditure, including debt interest payments, within a fiscal year.

 debt  budget  assets  deficit  surplus  national  lower

 

 

4. Complete the following sentences by filling in the missing words:

A   occurs when government income from and sales of public assets is greater than its total expenditure, including debt interest payments, within a fiscal year.

 surplus taxation  budget  balance  deficit

 

 

5. Complete the following sentences by filling in the missing words:

A     balance occurs when government income from taxation and sales of public assets is     to its total expenditure, including debt interest payments, within a fiscal year.

equal  budget  balance  deficit

 

 

6. Complete the following sentences by filling in the missing words:

Public (national) debt is the cumulative level of measured at a specific point in time and is the accumulation of all prior .

debt  deficits  national surplus 

 

 

7. Complete the following sentences by filling in the missing words:

taxation is tax paid directly by an individual or organisation to the  , e.g. property tax, personal property tax, income tax or taxes on assets.

government  Income  Direct  Indirect  central bank  nation 

 

 

8. Complete the following sentences by filling in the missing words:

     is taxes collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax e.g. the consumer.

Income  Direct  Indirect taxation  National

 

 

9. Complete the following sentences by filling in the missing words:

Some of the advantages of collecting tax revenue from income tax, rather than sales tax is that unlike sales taxes, income taxes are    meaning that the wealthiest individuals pay a    proportion than low income households e.g. in USA the wealthiest 5% of earners pay almost 50% of income tax revenue.

 larger  smaller  progressive  proportional  regressive 

 

 

10. Complete the following sentences by filling in the missing words:

Some of the advantages of collecting tax revenue from sales taxes, rather than income tax is that unlike corporation and income tax, sales taxes do     discourage hard work or entrepreneurship as they are    .  Sales taxes can also be used to discourage the     of certain kinds of goods - cigarettes, alcohol, petrol e.t.c.

 not  taxes  progressive  consumption  regressive 

 

 

11. Complete the following sentences by filling in the missing words:

Government     includes government or public spending and can be classified into current expenditures,     expenditures and    payments.

expenditure  welfare  transfer  capital  capital 

 

 

12. Complete the following sentences by filling in the missing words:

      are payment made to a person with no service or good provided in exchange e.g. pensions, student grants or unemployment benefit.  These are used by governments to redistribute money to those in society most in need.

payments  Welfare  Government  spending  Transfer 

 

 

13. Complete the following sentences by filling in the missing words:

      to    represents the proportion of any additional income earned that is consumed on domestically produced goods and services.

consume  propensityGovernment  Marginal  spending 

 

 

14. Complete the following sentences by filling in the missing words:

      to    represents the proportion of any additional income earned that is consumed on domestically produced goods and services.

consume  propensityGovernment  Marginal 

savetax monetary  income 

 

 

15. Complete the following sentences by filling in the missing words:

    to    represents the proportion of any additional income earned that is consumed on overseas produced goods and services.

import  Marginal taxconsumepropensity 

 

 

16. Complete the following sentences by filling in the missing words:

Multiplier - the factor by which any    in total output is greater than the initial change in initial spending.  It is calculated by the formulae 1 / (   ).multiplies1-MPC  MPS  transferincrease1-MPS  economyMPC 

 

 

 

17. Complete the following sentences by filling in the missing words:

The   represents the multiple by which GDP increases or decreases in response to an increase or decrease in government expenditures and investment.

multiplier  spending  investment  keynesian 

 

 

18. Complete the following sentences by filling in the missing words:

    are so called because they act to stabilise economic cycles and are automatically triggered without additional     action.  Within    this includes personal income taxes, which automatically fall as the national income declines and transfer payments such as unemployment insurance and welfare payments.

 stabilisers  Fiscal  government  policy  Monetary  financial  Automatic 

 

 

19. Complete the following sentences by filling in the missing words:

    consists of a set of policies aimed at governing the  of money and the level of       in the economy.

policy  Fiscal  supply  interest  rates  Monetary  central bank 

 

 

20. Complete the following sentences by filling in the missing words:

    operate independently of government control.  The level of   of course varies between nations with some more autonomous than others.

 independence  national  government  banks  Independent  central  Monetary 

 

 

 

21. Complete the following sentences by filling in the missing words:

The base rate or discount interest rate represents the         that central banks charge commercial banks for         loans.  This is used by governments to influence         in the economy.

interest  term income  short  long  monetary  policy  money  rates  interest

 

 

22. Complete the following sentences by filling in the missing words:

Expansionary monetary policy is an expansion of the         through reduced         and / or    easing.  This is used to stimulate the economy by reducing the cost of borrowing, which in turn encourages private     and   .

quantitative  consumption  rates  qualitative  money  supply  investment  interest 

 

 

23. Complete the following sentences by filling in the missing words:

Contractionary monetary policy means a     of the money supply through higher         and / or    the money in circulation.  This is used to fight    by increasing the cost of borrowing, which in turn decreases GDP and dampens   .

contraction  cyclical  interest  raising  rates  restricting  expansion  inflation  inflation 

 

 

24. Complete the following sentences by filling in the missing words:

      is another example of expansionary monetary policy and can be used when short-term interest rates are at or approaching zero.  In QE a         purchases government securities or other securities from the market in order to increase the         and encourage lending and investment.

Quantitative  supply  easing  raising  central  lowering  Expansion  bank  money 

 

 

Total Score:

The review sheet is available as a PDF at:  Review sheet

Teacher copy: Teacher copy

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