Fiscal Policy

The tools of fiscal policy are...

• Interest rates

• Taxes and Government spending

• Checks and balances

• Open market operations

Fiscal policy is actions taken by ______________ to stabilize the economy.

• The federal Reserve

• The Air force

• the government

• Wall street

Expansionary fiscal policies are laws aimed at reducing unemployment. How might Congress use expansionary fiscal policy?

• Decrease the discount rate

• Increase taxes

• Decrease government spending

• Increase government spending and decrease taxes

Contractionary fiscal policy are law aimed at reducing inflation. How might Congress use contractionary fiscal policy?

• Decrease government spending and increase taxes

• Decrease taxes

• Send stimulus checks to every person in the economy

• Increase government spending

When would Congress most likely use contractionary fiscal policy?

• During periods of high unemployment

• During periods of high inflation

• During periods of low economic production

• During periods of peace

When would Congress want to use expansionary fiscal policy?

• During periods of high inflation

• When the economy hits the peak of the business cycle

• During periods of high unemployment

• During an election

Which is an example of expansionary fiscal policy?

• The Federal reserve lowers the discount rate

• The government raises taxes on all citizens by 5%

• The government increases spending by building more infrastructure

• The federal reserve increases the reserve requirement

Which is an example of automatic stabilizer?

• Stimulus checks that congress had to vote on

• A paycheck from your employer

• Unemployment Insurance

• Interest on your savings account

Which is an example of contractionary fiscal policy?

• The government increasing taxes on all goods and services by 5%

• The president issues an executive order

• The federal reserve purchases bonds

• Government spending increasing

Which is a key characteristic of an automatic stabilizer?

• They take time to be implemented

• They occur automatically based on the phase of the business cycle we are in.

• They must be paid back to the government

• Only corporations have access to automatic stabilizers