Budget Basics
Which one of the following is an example of government capital expenditure?
A. Personal income tax refunds
B. Payment of unemployment benefits
C. Provision of transport infrastructure
D. Government loans to tertiary students for university fees
C. Provision of transport infrastructure
If total receipts are $200b and total outlays are $175b, what is the budget outcome?
A. Surplus of $25b
B. Deficit of $25b
C. Balanced
D. Deficit of $5b
A. Surplus of $25b
Two indicators of an expansionary budget are:
A. Lower tax rates and increased government spending
B. Higher tax rates and decreased spending
C. Lower interest rates and increased spending
D. Higher interest rates and decreased spending
A. Lower tax rates and increased government spending
Which budget initiative is most likely to support strong and sustainable economic growth?
A. Increased capital gains tax
B. Decrease in business investment grants
C. Infrastructure investment in renewable energy
D. Cuts to childcare subsidies
C. Infrastructure investment in renewable energy
Which of the following would reduce the size of the Australian Government’s budget deficit?
A. Company tax cuts
B. Personal income tax cuts
C. Increasing the rate of the GST
D. Increasing the tax-free threshold for personal income tax
C. Increasing the rate of the GST
Which of the following would increase public debt?
A. Running a consistent budget surplus
B. Using surpluses to buy back bonds
C. Financing a deficit by issuing government bonds
D. Receiving dividends from government business enterprises
C. Financing a deficit by issuing government bonds
Which of the following is a discretionary stabiliser?
A. Welfare payments rising during downturn
B. Automatic rise in unemployment benefits
C. Income tax cuts announced in the budget
D. Increase in GST revenue during boom
C. Income tax cuts announced in the budget
A key weakness of budgetary policy compared to monetary policy is:
A. It cannot target specific groups
B. It operates with long implementation lags
C. It has no effect on inflation
D. It is controlled by the RBA
B. It operates with long implementation lags
The fuel excise is a tax levied at a flat rate per litre of petrol. This tax is best described as:
A. Proportional and direct tax
B. Proportional and indirect tax
C. Regressive and direct tax
D. Regressive and indirect tax
D. Regressive and indirect tax
The main difference between the headline and underlying budget balances is:
A. Underlying includes one-off payments
B. Headline excludes automatic stabilisers
C. Underlying excludes volatile items like asset sales
D. Headline is adjusted for inflation
C. Underlying excludes one off items like asset sales
Automatic stabilisers help stabilise the business cycle by:
A. Discretionary changes to welfare
B. Rising government outlays during booms
C. Automatically increasing tax revenue and reducing spending during booms
D. Keeping the cash rate unchanged
C. Automatically increasing tax revenue and reducing spending during booms
Budget surpluses are least likely to support:
A. Reducing public debt
B. Increasing aggregate demand
C. Creating fiscal buffers
D. Funding future spending
B. Increasing aggregate demand
Which one of the following would be classified as government current expenditure when calculating aggregate demand?
A. Unemployment benefits provided by the Australian Government
B. Payment of salaries to the police force by a state government
C. A deposit paid for nuclear submarines
D. Local council library computer upgrades
B. Payment of salaries to the police force by a state government
Which of the following could explain why a forecast $5b surplus became a $5b deficit?
A. Terms of trade rose
B. Inflation and growth accelerated
C. Faster overseas growth
D. Weaker growth, lower ToT, higher unemployment
D. Weaker growth, lower ToT, higher unemployment
How could the 2025–26 Australian Government budget deficit be financed?
A. by increasing company tax rates
B. by reducing welfare spending
C. by selling government bonds to foreign companies
D. by all of the options listed above
C. by selling government bonds to foreign companies
The deficit is money already spent, changing tax and welfare spending only affects future budgets, does not help right now!
How does welfare payments support aggregate demand?
A. Increases C
B. Increases I
C. Increases G1
D. Increases G2
A. Increases C
Which one of the following best describes the budget stance in a year where the underlying cash balance is -2.6% of GDP and falling?
A. Contractionary
B. Neutral
C. Expansionary
D. Balanced
C. Expansionary
Consider the following Budget figures
Total receipts = $200b
Total outlays = $175b
Net cash flows from investments in financial assets (IFAPP) = $10b
Future Fund earnings = $5b
What is the size of the underlying cash surplus?
A. $10 billion
B. $15 billion
C. $25 billion
D. $30 billion
B. $15 billion
IFAPP is excluded, Future Fund Earnings is included already as part of total receipts (and counted towards underlying cash balance)
Which of the following is a discretionary initiative that could reduce inflationary pressures?
A. Decrease in JobSeeker due to fewer unemployed
B. Tax bracket creep during inflation
C. A government cut to infrastructure spending
D. Higher terms of trade from rising commodity prices
C. A government cut to infrastructure spending
(from a purely AD standpoint)
The 2024–25 Budget included energy bill relief and tax cuts. What is the most likely effect on macroeconomic goals?
A. Decrease in economic growth, lower inflation
B. Increase in unemployment, increase in savings
C. Increase in consumption and employment, with upward pressure on inflation
D. No change in living standards
C. Increase in consumption and employment, with upward pressure on inflation