Fiscal policy primarily involves:
A) Regulation of stock markets
B) Control of the money supply
C) Government spending and taxation
D) Managing foreign exchange reserves
An example of an expansionary fiscal policy is:
A) Increasing taxes
B) Cutting government spending
C) Reducing government debt
D) Increasing government spending
Which of the following is a tool of fiscal policy?
A) Open market operations
B) Setting interest rates
C) Government taxation
D) Changing reserve requirements
In the context of fiscal policy, a budget deficit occurs when:
A) Government spending exceeds tax revenues
B) Government spending is equal to tax revenues
C) Tax revenues exceed government spending
D) There is no government spending
Which of the following is a contractionary fiscal policy?
A) Reducing taxes
B) Increasing government spending
C) Increasing taxes
D) Lowering interest rates
Fiscal policy affects:
A) Only government debt
B) National income and economic growth
C) Only the banking sector
D) Inflation rates only
What is the primary aim of expansionary fiscal policy?
A) To reduce inflation
B) To control government debt
C) To increase economic activity
D) To increase taxes
The government can reduce inflation by:
A) Increasing government spending
B) Cutting taxes
C) Raising taxes
D) Increasing public debt
Fiscal policy is influenced by:
A) The central bank’s monetary policy
B) International trade policy
C) Government spending and taxation decisions
D) Market competition
A government stimulus package typically uses which type of fiscal policy?
A) Contractionary fiscal policy
B) Expansionary fiscal policy
C) Neutral fiscal policy
D) Structural fiscal policy
Which of the following is NOT a direct tool of fiscal policy?
A) Taxes
B) Government spending
C) Interest rates
D) Subsidies
Fiscal policy primarily aims to achieve:
A) Price stability only
B) Economic stability and growth
C) Lower taxes at all costs
D) A surplus in government spending
To combat a recession, a government might:
A) Increase taxes and reduce spending
B) Decrease government spending
C) Cut taxes and increase government spending
D) Raise interest rates
Which of the following is a result of contractionary fiscal policy?
A) Increased government spending
B) Increased budget deficit
C) Reduced inflationary pressure
D) Increased economic growth
The effect of increasing government spending is:
A) To increase national savings
B) To increase national debt
C) To decrease national income
D) To reduce inflation
Which fiscal policy action is most likely to reduce a budget deficit?
A) Increasing government spending
B) Lowering taxes
C) Raising taxes
D) Issuing more government bonds
The use of fiscal policy to control inflation involves:
A) Increasing government spending
B) Reducing taxes
C) Raising taxes and reducing spending
D) Lowering interest rates
The impact of an increase in government expenditure on the economy is known as:
A) The crowding out effect
B) The multiplier effect
C) The inflationary effect
D) The trade-off effect
Fiscal policy decisions are made by:
A) The central bank
B) International financial institutions
C) The government (usually the finance ministry)
D) Private sector organizations
Which of the following would be an example of fiscal stimulus?
A) Reducing government taxes and increasing public spending
B) Increasing the central bank’s reserve requirements
C) Raising interest rates to control inflation
D) Decreasing government spending and raising taxes
The crowding out effect refers to:
A) The government borrowing that drives up interest rates, reducing private investment
B) The effect of taxes on public demand
C) The reduction in government revenue due to tax cuts
D) The increase in government spending through external borrowing
Which of the following describes the long-term effect of contractionary fiscal policy?
A) High government debt
B) Economic growth acceleration
C) Increased unemployment and lower demand
D) Increased government spending
Which fiscal policy instrument directly influences the aggregate demand in an economy?
A) Taxes
B) Reserve requirements
C) Interest rates
D) Open market operations
Fiscal policy can be used to reduce income inequality by:
A) Implementing progressive taxes
B) Raising interest rates
C) Selling government bonds
D) Lowering taxes on the wealthy
When the government increases its expenditures, it typically causes:
A) Decreased budget deficit
B) A boost in aggregate demand
C) Higher private savings
D) Lower inflation rates
Fiscal policy can be most effective when:
A) Central bank policies are restrictive
B) The government is not in debt
C) It is used alongside appropriate monetary policies
D) Tax rates are always high
A progressive tax system means:
A) Everyone pays the same tax rate
B) The tax rate decreases as income increases
C) Higher earners pay a higher tax rate
D) Taxes are based on spending, not income
Which of the following would be an effect of expansionary fiscal policy?
A) Increased unemployment
B) Reduced economic growth
C) Increased government borrowing
D) Decreased inflation
The primary goal of fiscal policy is to:
A) Control inflation rates
B) Maximize profits for the government
C) Achieve a balanced budget
D) Influence economic activity and stabilize the economy
