#1
1. What is the primary goal of fiscal policy?
Maximize government revenue
Minimize government spending
Stabilize the economy
Encourage inflation
#2
6. During an economic recession, what type of fiscal policy is generally recommended?
Expansionary fiscal policy
Contractionary fiscal policy
Neutral fiscal policy
Stimulative fiscal policy
#3
15. How does fiscal policy differ from monetary policy in influencing the economy?
Fiscal policy involves changes in interest rates, while monetary policy involves changes in government spending.
Fiscal policy is controlled by the central bank, while monetary policy is determined by the government.
Fiscal policy involves changes in government spending and taxation, while monetary policy involves changes in the money supply and interest rates.
There is no difference between fiscal and monetary policy.
#4
2. Which of the following is an example of expansionary fiscal policy?
Increasing taxes
Decreasing government spending
Decreasing taxes
Increasing interest rates
#5
3. What is the crowding-out effect in fiscal policy?
Increased government spending stimulates private investment
Increased government borrowing leads to higher interest rates, reducing private investment
Decreased government borrowing leads to higher interest rates, stimulating private investment
Government spending has no impact on private investment
#6
7. Which component of government expenditure includes spending on infrastructure, education, and healthcare?
Transfer payments
Current expenditures
Capital expenditures
Debt repayments
#7
8. How does an increase in the government budget deficit affect interest rates in the loanable funds market?
Increases interest rates
Decreases interest rates
No impact on interest rates
The relationship is unpredictable
#8
12. What is the purpose of countercyclical fiscal policy?
To exacerbate economic fluctuations
To amplify the impact of business cycles
To counteract the effects of economic downturns or upswings
To maintain a consistent level of government spending
#9
13. How does a budget surplus affect the national debt?
It increases the national debt
It decreases the national debt
It has no impact on the national debt
The relationship is complex and depends on other economic factors
#10
16. What is the multiplier effect in fiscal policy?
The amplification of initial fiscal stimulus through successive rounds of spending and income generation.
The reduction of government spending to avoid economic overheating.
The automatic adjustment of tax rates based on the economic cycle.
The negative impact of fiscal policy on consumer confidence.
#11
4. How does discretionary fiscal policy differ from automatic stabilizers?
Discretionary fiscal policy relies on government regulations, while automatic stabilizers are spontaneous economic adjustments
Automatic stabilizers are intentional government actions, while discretionary fiscal policy occurs automatically
Discretionary fiscal policy is pre-planned, while automatic stabilizers are responsive to economic conditions
There is no difference between discretionary fiscal policy and automatic stabilizers
#12
5. In the context of fiscal policy, what is the 'Laffer curve' often used to illustrate?
The relationship between government spending and economic growth
The trade-off between inflation and unemployment
The impact of tax rates on government revenue
The effects of interest rate changes on consumer spending
#13
9. What is the primary purpose of a sovereign wealth fund in the context of government finance?
To fund social welfare programs
To stabilize the currency
To finance military expenditures
To regulate interest rates
#14
10. How does a balanced budget multiplier differ from a simple spending multiplier?
A balanced budget multiplier has a larger impact on economic output
A balanced budget multiplier considers both government spending and taxes
A simple spending multiplier involves only government spending
There is no difference between the two multipliers
#15
11. What is the difference between discretionary fiscal policy and automatic stabilizers?
Discretionary fiscal policy adjusts automatically to economic conditions, while automatic stabilizers require government intervention.
Discretionary fiscal policy is implemented through changes in tax rates, while automatic stabilizers involve changes in government spending.
Discretionary fiscal policy is intentional and requires legislative action, while automatic stabilizers operate without explicit government decisions.
There is no difference between discretionary fiscal policy and automatic stabilizers.
#16
14. What is the Ricardian equivalence theorem in the context of fiscal policy?
Consumers view tax cuts as permanent and increase their spending accordingly
Consumers view government debt as equivalent to future taxes and adjust their behavior accordingly
Government spending has no impact on consumer behavior
Tax cuts always lead to increased consumer savings
#17
18. What is the significance of the government debt-to-GDP ratio?
It indicates the total amount of government debt without considering the size of the economy.
It measures the affordability of government debt in relation to the size of the economy.
It represents the proportion of government revenue allocated to debt repayment.
It reflects the percentage of government spending allocated to debt servicing.