PAC PAC Economic & Fiscal Policy Analysis 2

Question 1

Which of the following best describes a 'regressive tax'?

Accepted Answer

A tax that takes a larger share of income from lower-income households than higher-income households

Answer

A regressive tax imposes a proportionally higher burden on lower-income earners, as is typical of flat sales taxes and payroll taxes up to a cap.

Question 2

A policy analyst is conducting a 'fiscal impact analysis' for a proposed development project. The primary purpose is to:

Accepted Answer

Estimate the net effect of the project on government revenues and expenditures

Answer

Fiscal impact analysis estimates how a proposed project will change the tax revenues and public service costs of local or state governments.

Question 3

What is the primary limitation of using GDP growth as the sole indicator of a policy's economic success?

Accepted Answer

GDP measures aggregate output but ignores distributional effects, inequality, and social well-being

Answer

GDP captures total economic output but says nothing about how gains are distributed, environmental sustainability, or other dimensions of human well-being.

Question 4

In the US budget process, 'mandatory spending' differs from 'discretionary spending' in that mandatory spending:

Accepted Answer

Is automatically funded based on eligibility criteria set in authorizing law

Answer

Mandatory programs like Social Security and Medicare are funded automatically when beneficiaries meet statutory eligibility criteria, without requiring annual appropriations.

Question 5

Which analytical concept helps policy analysts account for the fact that a dollar received in the future is worth less than a dollar today?

Accepted Answer

Discounting and net present value

Answer

Discounting converts future costs and benefits into present-value terms using a discount rate, reflecting the time preference for money and opportunity costs.

(PAC) Policy Analyst Certification Practice Test

(PAC) Policy Analyst Certification Practice Test

PAC PAC Economic & Fiscal Policy Analysis 2