Fiscal Policy Approaches Quiz

Test your knowledge on expansionary, contractionary fiscal policies, automatic stabilizers, and their impacts on the economy. Take the quiz now!

Practice Learn Test

What is the primary goal of expansionary fiscal policy?

To decrease government spending

To reduce inflation

To stimulate economic growth

To increase taxes

1 answered

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

Monetary policy

Government spending

Taxation

Transfer payments

1 answered

What is the main goal of contractionary fiscal policy?

To decrease unemployment

To stimulate economic growth

To reduce inflation

To increase government spending

1 answered

What is the primary tool of expansionary fiscal policy?

Decreasing government spending

Increasing taxes

Decreasing transfer payments

Increasing government spending

1 answered

Which of the following is a limitation of expansionary fiscal policy?

It may lead to higher government debt

It is effective in controlling inflation

It has no impact on unemployment

It does not affect aggregate demand

1 answered

Which of the following is a tool of contractionary fiscal policy?

Increasing government spending

Decreasing taxes

Decreasing government spending

Increasing transfer payments

1 answered

Which of the following is a drawback of using fiscal policy to stabilize the economy?

It is quick and easy to implement

It can lead to increased government debt

It has no impact on aggregate demand

It is always effective in controlling inflation

1 answered

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

Decreasing government spending during a recession

Increasing taxes during an economic boom

Increasing government spending during a recession

Decreasing taxes during an economic boom

1 answered

What is the relationship between fiscal policy and aggregate demand?

Fiscal policy affects aggregate demand through changes in interest rates

Fiscal policy directly influences aggregate demand through changes in government spending and taxation

Fiscal policy has no impact on aggregate demand

Fiscal policy affects aggregate demand through changes in the money supply

1 answered

#10

What is the purpose of automatic stabilizers in fiscal policy?

To provide stable funding for government programs

To automatically adjust government spending and taxation in response to economic fluctuations

To decrease government debt during economic downturns

To stimulate economic growth through targeted investments

1 answered

#11

What is the main difference between discretionary fiscal policy and automatic stabilizers?

Discretionary fiscal policy requires legislative action, while automatic stabilizers operate without explicit government intervention

Automatic stabilizers are always contractionary, while discretionary fiscal policy can be either expansionary or contractionary

Discretionary fiscal policy only affects taxation, while automatic stabilizers only affect government spending

Automatic stabilizers are controlled by the central bank, while discretionary fiscal policy is controlled by the treasury department

1 answered

#12

In the context of fiscal policy, what is the crowding-out effect?

An increase in private sector investment due to decreased government spending

A decrease in private sector investment due to increased government borrowing

A decrease in government spending due to increased private sector investment

An increase in government revenue due to decreased private sector borrowing

1 answered

#13

What is the Ricardian equivalence proposition in fiscal policy?

Government debt has no effect on consumption and investment decisions because individuals anticipate future tax increases to pay for current deficits

Government spending has a multiplier effect on consumption and investment, leading to economic growth

Government debt can be effectively reduced through tax cuts and increased government spending

Government borrowing has a direct positive impact on private sector investment

1 answered

#14

What is the term used to describe a situation where fiscal policy is ineffective due to certain economic conditions?

Liquidity trap

Stagflation

Ricardian equivalence

Fiscal impotence

1 answered

Fiscal Policy Approaches Quiz

What is the primary goal of expansionary fiscal policy?

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

What is the main goal of contractionary fiscal policy?

What is the primary tool of expansionary fiscal policy?

Which of the following is a limitation of expansionary fiscal policy?

Which of the following is a tool of contractionary fiscal policy?

Which of the following is a drawback of using fiscal policy to stabilize the economy?

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

What is the relationship between fiscal policy and aggregate demand?

What is the purpose of automatic stabilizers in fiscal policy?

What is the main difference between discretionary fiscal policy and automatic stabilizers?

In the context of fiscal policy, what is the crowding-out effect?

What is the Ricardian equivalence proposition in fiscal policy?

What is the term used to describe a situation where fiscal policy is ineffective due to certain economic conditions?

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