#1
Which of the following is a tool of fiscal policy used by the government to stimulate economic activity?
Public expenditure
ExplanationGovernment increases spending to boost economic activity.
#2
What does fiscal policy primarily aim to influence within an economy?
Unemployment rate
ExplanationFiscal policy aims to impact the unemployment rate.
#3
Which of the following is NOT a component of fiscal policy?
Interest rate manipulation
ExplanationFiscal policy doesn't involve direct interest rate control.
#4
What is the term for the situation when government expenditures exceed revenues in a fiscal year?
Deficit spending
ExplanationWhen the government spends more than it earns in a fiscal year.
#5
What is the term for a situation where the government's total expenditures equal its total revenues?
Balanced budget
ExplanationWhen government spending equals its earnings in a fiscal year.
#6
Which of the following is a limitation of fiscal policy?
Speed of implementation
ExplanationFiscal policy may be slow to take effect.
#7
Which of the following is a contractionary fiscal policy measure?
Increasing taxes
ExplanationGovernment raises taxes to decrease economic activity.
#8
What is the term used for the difference between government expenditures and revenues in a given year?
Budget deficit
ExplanationIt's when government spends more than it earns in a fiscal year.
#9
In fiscal policy, what does 'crowding out' refer to?
A decrease in private investment due to increased government borrowing
ExplanationGovernment borrowing hampers private investment.
#10
What is the primary objective of expansionary fiscal policy?
Fighting unemployment
ExplanationIt aims to reduce unemployment by boosting demand.
#11
In fiscal policy, what is the term for a decrease in government spending to control inflation?
Austerity measures
ExplanationGovernment reduces spending to curb inflation.
#12
What is the term used to describe a situation where the government's revenues exceed its expenditures in a fiscal year?
Fiscal surplus
ExplanationWhen government earns more than it spends in a fiscal year.
#13
Which of the following is an example of an automatic stabilizer in fiscal policy?
Social security benefits
ExplanationSocial security benefits automatically stabilize the economy during downturns.
#14
Which of the following is an example of discretionary fiscal policy?
Tax cuts during a recession
ExplanationGovernment deliberately cuts taxes to combat a recession.
#15
Which of the following fiscal policy tools is used to increase aggregate demand during a recession?
Tax cuts
ExplanationTax cuts are used to stimulate demand during economic downturns.
#16
In fiscal policy, what is the term for the effect of government borrowing on interest rates and private investment?
Crowding out
ExplanationGovernment borrowing can reduce private investment, crowding it out.