Macroeconomic Influences: Fiscal Policy's Impact on GDP and Price Levels Quiz
Explore how fiscal policy affects GDP, price levels, and economic stability with this quiz on macroeconomic principles.
#1
Which of the following is a component of fiscal policy?
Monetary policy
Interest rate targeting
Government spending
Foreign exchange intervention
#2
What is the primary objective of fiscal policy?
Stabilizing unemployment
Achieving price stability
Controlling inflation
Managing government debt
#3
If a government increases taxes to control inflation, what type of fiscal policy is being used?
Expansionary fiscal policy
Contractionary fiscal policy
Neutral fiscal policy
Monetary policy
#4
How does an increase in government spending affect GDP?
Decreases GDP
Has no effect on GDP
Increases GDP
Increases inflation
#5
What does the term 'crowding out' refer to in fiscal policy?
Increase in private investment due to government spending
Decrease in government spending due to public outcry
Reduction in private investment due to government borrowing
Increase in government spending due to public demand
#6
During an economic recession, which fiscal policy action would be most appropriate?
Decrease in government spending
Increase in taxes
Increase in government spending
Decrease in taxes
#7
Which of the following is an example of an automatic stabilizer in fiscal policy?
Discretionary spending
Unemployment benefits
Infrastructure projects
Tax cuts
#8
Which of the following best describes the fiscal multiplier effect?
The effect of government spending on overall economic activity
The effect of tax changes on consumer spending
The effect of interest rate changes on investment
The effect of exchange rate changes on exports
#9
What is the relationship between fiscal policy and the Phillips curve?
Fiscal policy has no impact on the Phillips curve
Fiscal policy only affects the short-run Phillips curve
Fiscal policy affects the long-run Phillips curve
Fiscal policy shifts the Phillips curve vertically
#10
Which of the following is a drawback of using fiscal policy to stabilize the economy?
It is difficult to implement in a timely manner
It is less effective than monetary policy
It can lead to budget deficits
It has no impact on aggregate demand
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