15 multiple-choice questions on fiscal policy

During an economic boom, which fiscal policy action is appropriate? a) Cutting government spending b) Reducing taxes c) Increasing interest rates d) Decreasing public investment

• a) Cutting government spending

• b) Reducing taxes

• c) Increasing interest rates

• d) Decreasing public investment

If the economy is experiencing high unemployment, the government is likely to implement: a) Expansionary fiscal policy b) Contractionary fiscal policy c) Tight monetary policy d) Decrease in government spending

• a) Expansionary fiscal policy

• b) Contractionary fiscal policy

• c) Tight monetary policy

• d) Decrease in government spending

Fiscal policy aims to achieve which of the following macroeconomic objectives? a) Stable prices b) Full employment c) Economic growth d) All of the above

• a) Stable prices

• b) Full employment

• c) Economic growth

• d) All of the above

The primary tool of expansionary fiscal policy is: a) Decreasing government spending b) Increasing taxes c) Decreasing taxes d) Increasing government spending

• a) Decreasing government spending

• b) Increasing taxes

• c) Decreasing taxes

• d) Increasing government spending

Fiscal policy can be described as: a) The manipulation of interest rates by the central bank b) The control of government spending and taxation c) The regulation of money supply in the economy d) The management of foreign trade balances

• a) The manipulation of interest rates by the central bank

• b) The control of government spending and taxation

• c) The regulation of money supply in the economy

• d) The management of foreign trade balances

Which of the following is an example of contractionary fiscal policy? a) Increasing government spending b) Cutting taxes c) Decreasing government spending d) Expanding social welfare programs

• a) Increasing government spending

• b) Cutting taxes

• c) Decreasing government spending

• d) Expanding social welfare programs

Fiscal policy decisions are made by: a) The Federal Reserve b) The President and Congress c) The Treasury Department d) The Securities and Exchange Commission

• a) The Federal Reserve

• b) The President and Congress

• c) The Treasury Department

• d) The Securities and Exchange Commission

Which of the following is NOT a fiscal policy tool? a) Government spending b) Taxation c) Interest rates d) Transfer payments

• a) Government spending

• b) Taxation

• c) Interest rates

• d) Transfer payments

Fiscal policy refers to the government's use of: a) Monetary tools to control inflation b) Spending and taxation to influence the economy c) Foreign exchange reserves to stabilize currency d) Interest rates to regulate economic growth

• a) Monetary tools to control inflation

• b) Spending and taxation to influence the economy

• c) Foreign exchange reserves to stabilize currency

• d) Interest rates to regulate economic growth

The government increases income tax rates. This action is an example of: a) Expansionary fiscal policy b) Contractionary fiscal policy c) Automatic stabilizers d) Fiscal neutrality

• a) Expansionary fiscal policy

• b) Contractionary fiscal policy

• c) Automatic stabilizers

• d) Fiscal neutrality