Fiscal Policy Study Guide

What are the two ways the government can stabilize the economy?

• Healthcare policy and education policy

• Fiscal policy and monetary policy

• Trade policy and environmental policy

• Foreign policy and defense policy

What is the main tool(s) used in fiscal policy to influence the economy?

• Interest rates

• Money supply

• Budget deficit

• Government spending and taxation

What is the main reason for a government to implement expansionary policy?

• To decrease output and slow down the economy

• To fight inflation

• To reduce taxes and limit public spending

• To increase GDP and reduce unemployment

What is an effect of contractionary fiscal policy?

• Increase government spending

• Decrease government spending

• Decrease taxes

• Higher interest rates

What is fiscal policy?

• Monetary tools used by central banks

• Actions by Congress to stabilize the economy

• International trade agreements

• Corporate financial strategies

Which lag time deals with Congress reacting to economic indicators before it's too late?

• Administrative

• Recognition

• Operational

• We did not learn this.

A budget surplus occurs when:

• Government spending exceeds revenue

• Government spending equals revenue

• Government spending is less than revenue

• Government spending is unrelated to revenue

A budget deficit occurs when:

• Government spending exceeds revenue

• Government spending equals revenue

• Government spending is less than revenue

• Government spending is unrelated to revenue

What are the three fiscal policy lag times?

• Recognition, administrative, operational

• Recognition, advisor, operational

• Medium of exchange, unit of account, store of value

• Reserve requirement, discount rate, open market operations

Which lag time deals with Congress taking time to pass legislation?

• Administrative

• Recognition

• Operational

• We did not learn this.