#1
What does fiscal policy refer to?
Monetary policy implemented by central banks
Government's use of taxation and spending to influence the economy
Policies related to foreign trade
Regulations imposed on financial institutions
#2
Which of the following is a tool of expansionary fiscal policy?
Decreasing government spending
Increasing taxes
Decreasing taxes
Decreasing money supply
#3
Which of the following is NOT a component of fiscal policy?
Government spending
Taxation
Interest rate adjustments
Transfer payments
#4
Which of the following is NOT a goal of fiscal policy?
Price stability
Full employment
Income equality
Trade balance
#5
Which of the following is a characteristic of expansionary fiscal policy?
Increased government spending and decreased taxes
Decreased government spending and increased taxes
Decreased government spending and decreased taxes
Increased government spending and increased taxes
#6
What is the term for the difference between government revenue and expenditure?
Budget deficit
Budget surplus
Budget equilibrium
Budget stability
#7
What is the primary goal of contractionary fiscal policy?
Stimulate economic growth
Reduce inflation
Increase government spending
Reduce unemployment
#8
What is the term used for a situation where government spending exceeds revenue?
Fiscal deficit
Fiscal surplus
Budget equilibrium
Revenue balance
#9
What is the crowding out effect in fiscal policy?
Increase in private investment due to government borrowing
Decrease in private investment due to government borrowing
Increase in government spending without affecting private investment
Decrease in government spending without affecting private investment
#10
In fiscal policy, what is the 'multiplier effect'?
The effect of tax cuts on increasing government revenue
The effect of government spending on increasing aggregate demand
The effect of government spending on reducing inflation
The effect of budget deficits on decreasing national debt
#11
Which of the following is a discretionary fiscal policy action?
Automatic stabilizers
Government subsidies for renewable energy
Unemployment benefits
Social Security payments
#12
Which of the following is an example of automatic stabilizers in fiscal policy?
A one-time tax rebate during an economic downturn
An increase in government spending on infrastructure projects
Unemployment insurance benefits
Government subsidies for agriculture
#13
Which economic theory argues for the use of fiscal policy to stabilize the economy?
Classical economics
Monetarism
Keynesian economics
Supply-side economics
#14
What is the Ricardian equivalence theorem in fiscal policy?
Tax cuts will lead to increased consumer spending
Government deficits are not a concern as individuals will adjust their saving to offset tax changes
Government debt has no effect on the economy
The government should always pursue balanced budgets
#15
According to the Laffer curve, what happens to tax revenue at very high tax rates?
Tax revenue increases continuously
Tax revenue decreases due to disincentives to work and invest
Tax revenue remains constant
Tax revenue fluctuates randomly
#16
What is the main drawback of using fiscal policy to stabilize the economy?
It is ineffective in influencing aggregate demand
It can lead to time lags in implementation and effectiveness
It always results in budget deficits
It is too costly for the government to implement
#17
What is the term for the difference between actual GDP and potential GDP?
Fiscal gap
Output gap
Aggregate demand shortfall
Potential output surplus