Impact of Fiscal and Monetary Policies

Which of the following is a tool of fiscal policy?

• Open market operations

• Government spending

• Interest rate adjustments

• Reserve requirements

What is the primary objective of monetary policy?

• To control inflation and stabilise the currency

• To increase government revenue

• To reduce unemployment through direct hiring

• To regulate international trade

How does an increase in interest rates typically affect consumer spending?

• Increases consumer spending

• Decreases consumer spending

• Has no effect on consumer spending

• Doubles consumer spending

Which of the following is a monetary policy instrument?

• Taxation

• Government subsidies

• Reserve requirements

• Public infrastructure projects

What is the effect of increased government spending on the economy?

• It decreases aggregate demand

• It increases aggregate demand

• It has no effect on aggregate demand

• It only affects the supply side

Which of the following is NOT a fiscal policy tool?

• Taxation

• Government spending

• Interest rate adjustments

• Transfer payments

What happens to the value of the Australian dollar if the Reserve Bank of Australia raises interest rates?

• The value of the dollar decreases

• The value of the dollar increases

• The value of the dollar remains unchanged

• The value of the dollar becomes volatile

Which of the following is a direct effect of lowering interest rates?

• Decreased borrowing

• Increased borrowing

• Increased savings

• Decreased investment

What is the role of taxation in fiscal policy?

• To control the money supply

• To influence economic activity

• To set interest rates

• To regulate foreign exchange

How does government spending on infrastructure typically affect employment?

• It decreases employment

• It increases employment

• It has no effect on employment

• It only affects private sector jobs