Fiscal Policy Quiz Practice

What is fiscal policy?

• Government's use of money supply

• Government's use of taxation and spending

• Central bank's interest rate decisions

• International trade policies

Which of the following is a tool of fiscal policy?

• Open market operations

• Taxation

• Discount rate

• Reserve requirements

What is the primary goal of expansionary fiscal policy?

• Reduce inflation

• Decrease government spending

• Stimulate economic growth

• Increase taxes

Which of the following can be a result of contractionary fiscal policy?

• Increased inflation

• Higher unemployment

• Economic growth

• Increased consumer spending

What is a budget deficit?

• When government revenue exceeds spending

• When government spending exceeds revenue

• A balanced budget

• A surplus in the budget

Which of the following is NOT a component of fiscal policy?

• Government spending

• Taxation

• Money supply

• Public debt

What does the term "automatic stabilizers" refer to?

• Policies that require legislative action

• Economic policies that automatically adjust to economic changes

• Fixed government spending programs

• Non-tax revenue sources

What is the main purpose of government spending in fiscal policy?

• To reduce the national debt

• To influence economic activity

• To balance the budget

• To increase taxes

Which fiscal policy action is likely to reduce inflation?

• Increasing government spending

• Cutting taxes

• Decreasing government spending

• Increasing transfer payments

What is a primary effect of tax cuts as a fiscal policy?

• Decreased consumer spending

• Increased disposable income

• Higher government revenue

• Lower investment