U5L4 HW Econ: Fiscal Policy

Define fiscal policy.

• Fiscal policy refers to the use of government spending and taxation to influence the economy.

• Fiscal policy is the regulation of the money supply by the central bank.

• Fiscal policy is the process of setting interest rates to control inflation.

• Fiscal policy is the management of a country's exchange rate.

Expansionary fiscal policy involves increasing government spending or decreasing taxes, while contractionary fiscal policy involves decreasing government spending or increasing taxes. Which of the following best differentiates between the two?

• Expansionary increases spending or cuts taxes; contractionary decreases spending or raises taxes.

• Expansionary decreases spending; contractionary increases spending.

• Both policies increase government spending.

• Both policies decrease taxes.

The difference between a deficit and the national debt is:

• A deficit is the yearly shortfall when the government spends more than it collects; the national debt is the total amount owed over time.

• A deficit is the total amount owed by the government; the national debt is the yearly shortfall.

• A deficit and the national debt are the same thing.

• A deficit is money the government saves each year; the national debt is the total savings.

Identify government spending that most likely results in long-term growth.

• Building highways and infrastructure

• Paying government employee salaries

• Funding short-term relief programs

• Purchasing office supplies

Supply-side fiscal policy is defined as:

• A policy aimed at increasing aggregate supply by improving the efficiency of markets and production.

• A policy focused on increasing government spending to boost demand.

• A policy that only involves reducing taxes for consumers.

• A policy that restricts imports to protect domestic industries.

The government stabilizes the economy by:

• Raising and lowering taxes and government spending

• Ignoring economic fluctuations

• Only focusing on foreign policy

• Eliminating all regulations

What is Fiscal Policy? Fill in the blank: Fiscal Policy refers to actions by _______ to stabilize the economy.

• Congress

• the Supreme Court

• the Federal Reserve

• private corporations

What is Monetary Policy? Fill in the blank: Monetary Policy refers to actions by the _______ to stabilize the economy.

• Federal Reserve Bank

• Department of Education

• Supreme Court

• Environmental Protection Agency

Which of the following is a tool of Fiscal Policy?

• Reserve Ratios

• Spending

• Discount Rate

• Open Market Operations

According to the car analogy, what does driving a car at 120mph represent in terms of the economy?

• A) High unemployment

• B) Full employment

• C) Extremely low unemployment causes inflation

• D) Economic growth