Government Fiscal Policies and Constitutional Powers Quiz

The legislative branch, often a parliament or congress, holds the authority to formulate and approve fiscal policies.

Monetary policy, involving interest rates and money supply, is not a fiscal tool; it falls under the purview of central banks.

The executive branch, often led by the head of state or government, is responsible for implementing fiscal policies in many countries.

A budget deficit occurs when government spending surpasses its revenue, leading to a shortfall that may be covered by borrowing.

In the U.S., the legislative branch, Congress, has the constitutional authority to approve the federal budget.

The Taxing and Spending Clause in the U.S. Constitution grants Congress the power to levy taxes and allocate government spending.

Increasing reserve requirements is a contractionary fiscal policy measure, intended to reduce spending and curb inflation.

Discretionary fiscal policy aims to stabilize the economy by adjusting government spending and taxation during economic downturns.

Expansionary fiscal policy aims to boost economic growth by increasing government spending and cutting taxes.

Automatic stabilizers operate without requiring legislative intervention, adjusting automatically to economic conditions.

The national debt represents the cumulative amount of money owed by the government, reflecting borrowing over time.

Persistent budget deficits can lead to increased borrowing, causing higher interest rates and potentially impacting the overall economy.