Fiscal Policy - A Level Economics Quiz

What is the primary objective of fiscal policy in the UK?

• To control inflation

• To manage government spending and taxation

• To regulate interest rates

• To control the money supply

Which of the following is an example of expansionary fiscal policy?

• Increasing taxes

• Reducing government spending

• Increasing government spending

• Selling government bonds

In the context of fiscal policy, what does the term "budget deficit" mean?

• Government revenue exceeds government spending

• Government spending exceeds government revenue

• Government spending equals government revenue

• Government debt is fully paid off

Which of the following is a tool of fiscal policy?

• Open market operations

• Discount rate

• Taxation

• Reserve requirements

How does a government typically finance a budget deficit?

• By printing more money

• By increasing interest rates

• By borrowing through issuing bonds

• By reducing public sector wages

What is the likely effect of a contractionary fiscal policy on the economy?

• Increase in inflation

• Decrease in unemployment

• Decrease in aggregate demand

• Increase in economic growth

Which of the following is a potential drawback of using fiscal policy to manage the economy?

• It can lead to deflation

• It can cause a liquidity trap

• It can result in time lags

• It can increase the money supply

What is the term for the automatic changes in government spending and taxation that occur without additional government action?

• Discretionary fiscal policy

• Automatic stabilizers

• Monetary policy

• Supply-side policies

Which of the following is an example of a discretionary fiscal policy measure?

• Unemployment benefits

• Progressive tax system

• A new infrastructure spending program

• Social security payments

What is the crowding-out effect in the context of fiscal policy?

• When government spending leads to increased private investment

• When government borrowing leads to higher interest rates and reduced private investment

• When government spending reduces inflation

• When government borrowing decreases the money supply