Econs 15 July Chapter 12: Fiscal Policy Quiz

What is the main source of government revenue?

• Investment income

• Repayment of government loans

• Taxes collected

• Sales of goods

What does a budget surplus indicate?

• Government spending equals revenue

• Government spending exceeds revenue

• Government is in debt

• Government revenue exceeds spending

When does a contractionary fiscal policy get implemented?

• When output increases

• During a recession

• When AD decreases

• During inflationary situation

What is happens to the policy if there is a Crowding-out effect in place?

• Has no effect on the economy

• Reduces the impact of fiscal policy

• Increases the impact of fiscal policy

• Stabilizes the economy

What is the purpose of automatic stabilizers in the economy?

• Increase fluctuations in AD

• Reduce fluctuations in AD

• Cause inflation

• Lead to unemployment

How does Unemployment Compensation work during a recession?

• Leads to inflation

• Help increase spending a little more

• Has no effect on the economy

• Decreases spending

What is the impact of Progressive Income Tax during economic expansion?

• Increases taxes paid

• Reduces taxes paid

• Leads to recession

• No impact on taxes

What is the role of government in the economy according to the text?

• Stabilize the economy using fiscal policy

• Stay out of economic matters

• Only focus on defense and justice

• Not mentioned in the text

What is the definition of Fiscal Policy?

• Changes in government spending or taxes to reach desired income level

• Changes in taxes only

• Changes in government spending and taxes simultaneously

• Changes in government spending only

When is Expansionary Fiscal Policy used?

• During inflation

• When economy is in recession

• When AD decreases

• When output decreases