Understanding Fiscal Policy Fundamentals

What are the two main types of fiscal policy?

• Expansionary and Contractionary

• Monetary and Fiscal

• Supply-side and Demand-side

• Structural and Cyclical

Which of the following is a tool of fiscal policy?

• Interest rates

• Government spending

• Exchange rates

• Money supply

How does expansionary fiscal policy impact economic growth?

• It decreases aggregate demand

• It increases aggregate demand

• It stabilises aggregate demand

• It has no effect on aggregate demand

What is the primary goal of contractionary fiscal policy?

• To reduce inflation

• To increase employment

• To boost economic growth

• To decrease interest rates

Which of the following is a component of the government budgeting process?

• Setting interest rates

• Allocating funds to different sectors

• Regulating the money supply

• Adjusting exchange rates

How can fiscal policy influence inflation?

• By changing the money supply

• By altering government spending and taxation

• By adjusting interest rates

• By modifying exchange rates

What is a potential negative effect of expansionary fiscal policy?

• Increased unemployment

• Higher inflation

• Decreased consumer spending

• Lower economic growth

Which of the following best describes a balanced budget?

• Government spending exceeds revenue

• Government revenue equals spending

• Government revenue is less than spending

• Government revenue is greater than spending

What is the role of automatic stabilisers in fiscal policy?

• To increase government intervention

• To reduce the need for discretionary fiscal policy

• To control the money supply

• To set interest rates

Which of the following is an example of a discretionary fiscal policy action?

• Unemployment benefits

• Progressive tax rates

• A new infrastructure spending bill

• Social security payments