#1
Which of the following is an example of a fiscal policy tool?
Taxation
ExplanationFiscal policy tool involving government revenue collection.
#2
What is the primary objective of expansionary fiscal policy?
Stimulate economic growth
ExplanationTo boost economic activity and encourage growth.
#3
What is the main goal of contractionary fiscal policy?
To decrease aggregate demand
ExplanationTo cool down an overheated economy by reducing spending and demand.
#4
Which of the following is a characteristic of a progressive tax system?
Tax rate increases as income increases
ExplanationTax burden increases with higher income levels.
#5
Which of the following is NOT considered a tool of fiscal policy?
Interest rates
ExplanationMonetary policy tool controlled by central banks.
#6
What is the term used to describe a situation where government spending exceeds revenue?
Budget deficit
ExplanationResults in government borrowing to cover the shortfall.
#7
Which of the following is an example of an automatic stabilizer in fiscal policy?
Unemployment benefits
ExplanationPrograms that automatically provide support during economic downturns.
#8
What is the concept of crowding out in fiscal policy?
Decrease in private investment due to government borrowing
ExplanationReduction in private sector spending due to increased government borrowing.
#9
What is the formula for the fiscal multiplier?
1 / (1 - MPC)
ExplanationRepresents the overall impact of government spending on the economy.
#10
What does the term 'laffer curve' illustrate in fiscal policy?
The relationship between tax rates and tax revenue
ExplanationShows the point where tax rates maximize revenue before decreasing incentives.
#11
Which of the following best describes the concept of 'crowding in'?
Increase in private investment due to government borrowing
ExplanationPrivate sector stimulated by government spending.
#12
What is the name of the economic model that suggests governments should adjust their fiscal policies to stabilize the economy over the business cycle?
Keynesian economics
ExplanationAdvocates for government intervention during economic fluctuations.
#13
Which of the following statements is true regarding fiscal policy and long-run economic growth?
Fiscal policy can directly influence long-run economic growth through investments in education and infrastructure
ExplanationGovernment spending in key areas can foster long-term economic development.
#14
In the context of fiscal policy, what is the 'debt-to-GDP ratio' used to measure?
The sustainability of the government's debt burden relative to the size of the economy
ExplanationIndicates the ability of a nation to service its debt obligations.
#15
In fiscal policy, what is the term for the portion of an increase in income that is not saved or taxed, but rather spent on goods and services?
Marginal propensity to consume (MPC)
ExplanationReflects the proportion of income spent on consumption.
#16
What is the term for the situation when the government spends more money than it collects in revenue?
Budget deficit
ExplanationLeads to borrowing to cover the shortfall.
#17
Which of the following fiscal policies is most likely to reduce aggregate demand?
Contractionary fiscal policy
ExplanationIntended to cool down an overheated economy by reducing spending.