NEW
Font size
WorksheetsFiscal Policy Contractionary Policy
Total questions: 20
Worksheet time: 20mins
Which would be the least appropriate action for an Expansionary fiscal policy?
Increase taxes
Decrease taxes
Increase government spending
Combination of decreasing taxes and increasing spending
Which of the following groups is most responsible for implementing fiscal policy?
U.S. President
Federal Reserve Board
Council of Economic Advisors
U.S. Congress
When would a Contractionary fiscal policy most likely be used?
recessions
times where economy is operating at full employment
periods of sustained, demand pull inflation
Anytime we have a negative GDP gap
What is NOT a consequence of Expansionary fiscal policy?
AD shifts Right
Increased Price levels
increased output
increased unemployment
What is NOT a consequence of Contractionary fiscal policy?
aggregate demand shifts left
price level increases
unemployment increases
output decreases
What best describes a recessionary gap?
when ouput falls below potential
when output exceeds potentional
when output increases
when unemployment decreases
If the economy experiences a dramatic rise in prices, which fiscal policy action should be the most appropriate action taken?
Selling securities on the open market
Raising interest rates
Reducing government spending
Raising reserve requirements
How are fiscal and monetary policies most similar?
They both use the same tools to fix economic problems
They both try to promote economic stability.
They always must have Congressional approval before passing.
They both are decided by a Board of Governors.
What best refers to the financial situation of a country when the government spends more money than they take in each year?
Debt
Deficit
Surplus
Expansionary
Which of the following are contractionary fiscal policies that are meant to slow down speedy economic growth?
increased taxation and increased government spending
increased taxation and decreased government spending
decreased taxation and no change in government spending
no change in taxation and increased government spending
Which of the following is true for bonds but not for stocks?
Bonds are the least liquid form of assets.
Bonds represent partial ownership in a company.
Bonds earn variable rates of return.
Bonds are interest-bearing assets.
Which of the following asset is considered the most liquid?
Stocks
Bonds
Currency
Real estate
Which of the following will happen when interest rates increase in an economy?
The spending multiplier will decrease.
Investment spending will increase.
The price of previously issued bonds will increase.
The opportunity cost of holding money will increase.
Which of the following is true for both stocks and bonds?
They are interest-bearing assets.
They are easily converted to cash.
They are risk-free assets.
They are equity.
Cash, a house, bonds, and a savings account are all financial assets. Which of the following rankings lists these assets from the least liquid to the most liquid?
Bonds, house, savings account, cash
Savings account, cash, bonds, house
House, bonds, savings account, cash
Cash, bonds, house, savings account
Nathan has been unable to trust banks since the failure of his savings and loan bank. He claims that storing his hard-earned money at home is costless. Is Nathan correct?
No, because money is the least liquid form of financial assets.
No, because the opportunity cost of holding money is the lost interest he could have earned on other financial assets.
Yes, because the opportunity cost of holding money is the real value of goods and services it can purchase.
Yes, because there is no opportunity cost in holding money.
Which of the following is adjusted by the actual inflation rate?
Automatic stabilizers
Price of previously issued bond
Real interest rates
Unemployment rate
Spencer took a 9 percent one-year fixed-rate loan to buy a new car. He expected to pay a real interest rate of 5 percent. If at the end of the year Spencer only paid a 3 percent real interest rate, which of the following is true?
The actual inflation rate was 2%
The actual inflation rate was 4%
The nominal interest rate was 5%
The actual inflation rate was 6%
If the interest rate on a one-year loan is 5% and the expected inflation rate is −2% for the same period, what is the expected real interest rate on the loan?
−7%
−2%
2%
7%
Which of the following transactions will keep M1 unchanged?
Leila deposited coins from her piggy bank into her checking account.
Mike purchased government bonds and paid with a check.
Sam transferred money from his savings account to his checking account.
Sandy withdrew money from her savings accounts.
