Overview
Multiple-Choice
1. Which of the following is an example of expansionary fiscal policy?
a. Increase taxes.
b. Decrease government spending.
c. Increase government spending.
d. Increase taxes and decrease government spending equally.
ANSWER: c
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
2. A balanced budget is present when:
a. the economy is at full employment.
b. the actual level of aggregate spending equals the planned level of spending.
c. public sector spending equals private sector spending.
d. government revenues equal government expenditures.
ANSWER: d
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
3. When the federal government is running a budget deficit:
a. government tax revenues exceed government expenditures.
b. government expenditures exceed government tax revenues.
c. the economy must be in an economic recession.
d. the size of the national debt will decline.
ANSWER: b
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Automatic Stabilizers
4. Changes in government spending and/or taxes as the result of legislation is called:
a. open market operations of the Federal Reserve.
b. discretionary fiscal policy.
c. balanced budget operations.
d. discretionary monetary policy.
ANSWER: b
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
5. The Keynesian analysis of fiscal policy argues that:
a. fiscal policy should generally be expansionary except during periods of economic recession.
b. fiscal policy should generally be restrictive except during inflationary booms.
c. the federal budget should be balanced annually except during war.
d. the federal budget should be used to maintain aggregate demand at a level consistent with full employment.
ANSWER: d
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
6. Contractionary fiscal policy is deliberate government action to influence aggregate demand and the level of real GDP through:
a. expanding and contracting the money supply.
b. encouraging business to expand or contract investment.
c. regulating net exports.
d. decreasing government spending or increasing taxes.
ANSWER: d
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
7. A government spending and taxation policy to achieve macroeconomic goals is known as:
a. countercyclical policy.
b. fiscal policy.
c. monetary policy.
d. a balanced budget.
e. presidential discretion.
ANSWER: b
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
8. Fiscal policy is government action to influence aggregate demand and in turn to influence the level of real GDP and the price level, through:
a. expanding and contracting the money supply.
b. regulation of net exports.
c. changes in government spending and/or tax revenues.
d. encouraging businesses to invest.
ANSWER: c
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
9. Expansionary fiscal policy consists of:
a. increasing government spending.
b. increasing payroll taxes to finance health care.
c. decreasing government spending.
d. raising the minimum wage.
ANSWER: a
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
10. The government is pursuing an expansionary policy if it:
a. decreases its spending and increases its tax revenues.
b. increases its spending or increases its tax revenues.
c. decreases its spending or reduces its tax revenues.
d. increases its spending and/or reduces its tax revenues.
ANSWER: d
DIFFICULTY: Easy
NATIONAL STANDARDS: United States – BUSPROG: Analytic
TOPICS: Discretionary Fiscal Policy
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