Fiscal and Monetary Policy Quiz

What is fiscal policy?

• Controlling interest rates

• Government spending and taxation

• Making rules for businesses

• Managing the stock market

What is monetary policy mostly about?

• Changing taxes

• Controlling imports and exports

• Controlling interest rates and money supply

• Managing education budgets

Which tool is used in fiscal policy?

• Interest rates

• Tax rates

• Exchange rates

• Price controls

Which diagram shows the effect of government spending on the economy?

• Production Possibility Curve

• Aggregate Demand and Aggregate Supply (AD/AS)

• Supply and Demand for one product

• Business Cycle Curve

What do Keynesian economists believe during a recession?

• The government should do nothing

• The government should spend more to help the economy

• Prices should go up

• The central bank should raise interest rates

What shape is the long-run aggregate supply (LRAS) curve in the Neo-Classical model?

• Flat

• Upward-sloping

• Vertical

• Downward-sloping

What is a goal of supply side policies?

• Increase government spending

• Raise taxes

• Make the economy more productive

• Control the money supply

Which of these is a labour market supply-side policy?

• Investment in roads

• Cutting income tax to encourage working

• Raising VAT

• Lowering interest rates

What is one possible side effect of expansionary fiscal policy?

• More unemployment

• Lower inflation

• Higher inflation

• A stronger currency

What happens when the central bank increases interest rates?

• Borrowing becomes cheaper

• People borrow more

• Spending increases

• Borrowing becomes more expensive