Fiscal Policy

Who is in charge of setting fiscal policy?

• Banks

• The Federal Reserve

• The government

What are the two tools of fiscal policy? MARK TWO

• Government spending

• Interest rates

• Savings bonds

• Taxes

Which type of fiscal policy is government likely to use during a downturn in the economy?

• Contractionary

• Expansionary

• Inflationary

• Recessionary

Which type of fiscal policy is government likely to use when inflation becomes a problem?

• Contractionary

• Expansionary

• Inflationary

• Recessionary

True or false: Keynesian economics says that, when consumer spending decreases, government should help fill the gap in spending.

• True

• False

In theory, when the government spends more money or lowers taxes, what happens to the money supply? 

• Increase because of the multiplier effect

• Decreases because of the multiplier effect

• remains unchanged

REVIEW: When the economy falls into a recession, fiscal policy says that government should:

• decrease spending and decrease taxes

• decrease spending and increase taxes

• increase spending and decrease taxes

• increase spending and increase taxes

REVIEW: When the economy is facing inflationary pressures, fiscal policy says that government should:

• decrease spending and decrease taxes

• decrease spending and increase taxes

• increase spending and decrease taxes

• increase spending and increase taxes