Fiscal Policy and Public Finance Quiz

Test your knowledge on fiscal policy, its tools, objectives, and differences with monetary policy. Explore public finance concepts in this quiz.

Practice Learn Test

Which of the following is a tool of fiscal policy?

Interest rates

Taxation

Exchange rates

Money supply

What is the primary goal of expansionary fiscal policy?

Increase unemployment

Reduce inflation

Stimulate economic growth

Reduce government spending

Which of the following is a goal of fiscal policy?

Maximize government debt

Minimize inflation

Minimize unemployment

Maximize trade deficits

Which of the following is an example of expansionary fiscal policy?

Increasing taxes

Decreasing government spending

Increasing government spending

Decreasing the money supply

Which of the following is an example of contractionary fiscal policy?

Cutting taxes

Increasing government spending

Increasing the money supply

Reducing government spending

Which of the following is a component of fiscal policy?

Monetary policy

Government spending

Foreign exchange policy

Trade policy

What is the key objective of contractionary fiscal policy?

Stabilize prices

Increase government debt

Reduce taxes

Stimulate investment

What is the difference between fiscal policy and monetary policy?

Fiscal policy involves changing the money supply, while monetary policy involves changing government spending.

Fiscal policy involves changing government spending and taxation, while monetary policy involves changing the money supply.

Fiscal policy is used to control inflation, while monetary policy is used to control government debt.

Fiscal policy is used to regulate banks, while monetary policy is used to regulate government spending.

What is the difference between fiscal deficit and fiscal surplus?

Fiscal deficit occurs when government spending exceeds revenue, while fiscal surplus occurs when revenue exceeds spending.

Fiscal deficit occurs when revenue exceeds spending, while fiscal surplus occurs when spending exceeds revenue.

Fiscal deficit occurs when government borrows money, while fiscal surplus occurs when government saves money.

Fiscal deficit occurs when government saves money, while fiscal surplus occurs when government borrows money.

#10

What is the crowding-out effect in fiscal policy?

An increase in government spending crowds out private investment.

An increase in government spending crowds in private investment.

A decrease in government spending crowds out private investment.

A decrease in government spending crowds in private investment.

#11

What is the difference between a progressive tax and a regressive tax?

A progressive tax takes a higher percentage of income from low-income earners, while a regressive tax takes a higher percentage from high-income earners.

A progressive tax takes a higher percentage of income from high-income earners, while a regressive tax takes a higher percentage from low-income earners.

A progressive tax takes the same percentage of income from all earners, while a regressive tax takes a higher percentage from high-income earners.

A progressive tax takes a higher percentage of income from all earners, while a regressive tax takes a higher percentage from low-income earners.

#12

Which of the following is NOT a tool of fiscal policy?

Government spending

Taxation

Interest rates

Transfer payments

#13

What is the Laffer curve?

A curve that shows the relationship between tax rates and government spending.

A curve that shows the relationship between tax rates and government revenue.

A curve that shows the relationship between inflation and unemployment.

A curve that shows the relationship between interest rates and investment.

#14

What is the role of automatic stabilizers in fiscal policy?

To automatically balance the budget during economic downturns.

To automatically increase government spending during economic downturns.

To automatically decrease government spending during economic downturns.

To automatically reduce taxes during economic downturns.

#15

Which of the following is an example of discretionary fiscal policy?

Automatic stabilizers

Unemployment benefits

Tax cuts to stimulate consumer spending

Social security payments

#16

What is the budget multiplier?

The ratio of government spending to tax revenue.

The ratio of government spending to the change in GDP.

The ratio of tax revenue to government spending.

The ratio of tax revenue to the change in GDP.

#17

What is Ricardian equivalence?

The idea that government debt has no effect on consumer behavior.

The idea that consumers will increase saving in anticipation of future tax increases to pay for current government spending.

The idea that consumers will decrease saving in anticipation of future tax increases to pay for current government spending.

The idea that government debt can be repaid through future economic growth.