#1
Which of the following is a component of GDP?
All of the above
ExplanationGDP includes consumption, investment, government spending, and net exports.
#2
What does GDP stand for?
Gross Domestic Product
ExplanationGDP is the total value of goods and services produced in a country.
#3
What is a budget deficit?
When government spending exceeds government revenue in a given period
ExplanationIt occurs when expenditures surpass income within a specific timeframe.
#4
Which of the following is a contractionary fiscal policy measure?
Increasing taxes
ExplanationRaising taxes is a measure to cool down an overheated economy.
#5
What is the role of the government in fiscal policy?
To adjust government spending and taxation
ExplanationThe government uses fiscal policy to manage its financial activities.
#6
What is the primary goal of fiscal policy?
To promote economic growth
ExplanationFiscal policy aims to influence the economy through government spending and taxation.
#7
Which of the following is a tool of expansionary fiscal policy?
Decreasing taxes
ExplanationLowering taxes is a measure to stimulate economic growth during downturns.
#8
What is the Phillips Curve?
A curve illustrating the relationship between inflation and unemployment
ExplanationIt depicts the trade-off between inflation and unemployment levels.
#9
What is the difference between fiscal policy and monetary policy?
Fiscal policy involves government spending and taxation, while monetary policy involves controlling the money supply and interest rates
ExplanationFiscal policy manages government finances, while monetary policy regulates money and interest rates.
#10
What is automatic stabilizer?
A fiscal policy tool used to adjust government spending automatically in response to economic conditions
ExplanationIt helps stabilize the economy by automatically adjusting spending in response to economic changes.
#11
What is the national debt?
The total amount owed by the government to its creditors
ExplanationIt represents the cumulative amount the government owes from borrowing.
#12
What is crowding out?
A situation where government borrowing leads to increased interest rates, reducing private investment
ExplanationGovernment borrowing limits private investment due to higher interest rates.
#13
What is the Laffer Curve?
A curve illustrating the relationship between tax rates and government revenue
ExplanationIt shows the point where tax rates maximize government revenue.
#14
What does the term 'stagflation' refer to?
A situation of high inflation and high unemployment
ExplanationIt describes a rare combination of economic stagnation and inflation.