AP Macro: Fiscal Policy (Ch.32)

The use of taxes and government spending to affect the economy

• Monetary Policy
• Fiscal Policy
• Contractionary Policy
• Expansionary Policy

If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?

• Selling securities on the open market
• Raising interest rates
• Reducing government spending
• Raising reserve requirements

An example of expansionary fiscal policy would be

• cutting taxes.
• cutting government spending.
• cutting production of consumer goods.
• cutting prices of consumer goods.

Which of the following is not a tool of fiscal policy?

• Taxing
• Spending
• Interest Rates
• All of these options are tools of fiscal policy.

To promote higher economic growth, the best way is to

• decrease government spending and increase taxation.

• decrease government spending and decrease taxation.

• increase government spending and decrease taxation.

• increase government spending and increase taxation.

Progressive tax structure is when

• the tax rate declines as income increases

• the tax rate increases as income increases

• the tax rate remains the same, regardless of size of income

• the tax rate increases the total volume of consumer expenditures

During a recession, which of the following is likely to occur?

• an increase in real wages
• an increase in production
• and increase in the GDP growth rate
• an increase in the unemployment rate

Which of the following are responsible for making fiscal policy decision? 

• The President and Congress
• The Federal Reserve System
• The National Council of Economic Advisors
• The commerce Department

Taxing & spending to help the economy grow is referred to as

• Fiscal stimulus

• monetary policy

• Fiscal restraint

• budget deficit

If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is 

• decreasing taxes.
• decreasing spending.
• decreasing the money supply.
• decreasing the reserve requirement.