Fiscal Policy Quiz

Fiscal policy is:

• The use of government spending and revenue collection to influence the economy

• The use of monetary policy by the Fed to influence economy

• When supply exceeds demand

• When the Federal Reserve prints money

Which best describes "expansionary fiscal policy"?

• Increasing government spending and lowering taxes

• Decreasing government spending and increasing taxes

• Increasing government spending and increasing taxes

• Decreasing government spending and lowering taxes

Which best describes "contractionary fiscal policy"?

• Increasing government spending and lowering taxes

• Decreasing government spending and increasing taxes

• Increasing government spending and increasing taxes

• Decreasing government spending and lowering taxes

Which fiscal policy would you want to use at point 3?

• Expansionary

• Contractionary

The two "tools" of Fiscal Policy are:

• the power to tax

• the power to spend

• the power to borrow money

• the power to print money

During a contraction / recession, the Federal Government should use

• an expansionary fiscal policy

• a contractionary fiscal policy

If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is 

• decreasing taxes.
• decreasing spending.
• decreasing the money supply.
• decreasing the reserve requirement.

If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?

• Selling securities on the open market
• Raising interest rates
• Reducing government spending
• Raising reserve requirements

The Federal government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies  might be enacted to reduce inflation?

• Increasing taxation
• Open market sales
• decreasing taxation
• Increasing government spending

His ideas rose to power in the 1930s. He believed that government should do something to spark economic activity during an economic downturn.

• Friedrich Hayek

• John Maynard Keynes

• Milton Friedman