This quiz works best with JavaScript enabled. Home > Economics > Fiscal > Policy > Fiscal Policy – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Fiscal Policy Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. If the Fed wanted to contract or tighten the economy to help fight inflation, they might A) Increase reserves to limit what banks can loan out. B) Lower the interest rate. C) Decrease reserves allowing banks to loan more. D) Decrease government spending. Show Answer Correct Answer: A) Increase reserves to limit what banks can loan out. 2. Decrease gov spending A) R GDP goes Down. B) Unemployment goes down. C) Inflation goes up. D) None of above. Show Answer Correct Answer: A) R GDP goes Down. 3. If the government is concerned about unemployment, which tool would they use? A) Increase spending. B) Increase reserve requirement. C) Increase discount rate. D) Increase taxes. Show Answer Correct Answer: A) Increase spending. 4. Which of the following is expansionary policy? A) Selling bonds. B) Increase required reserves. C) Increase fed fund rate. D) Decrease discount rate. Show Answer Correct Answer: D) Decrease discount rate. 5. Fiscal policy during a recession is likely to be ..... A) Expansionary. B) Contractionary. C) Both Expansionary and Contractionary. D) Neither Expansionary nor Contractionary. Show Answer Correct Answer: A) Expansionary. 6. How many Board of Governor members are there? A) 5. B) 3. C) 7. D) 12. Show Answer Correct Answer: C) 7. 7. Who is in charge of managing fiscal policy? A) Mr. Covington. B) Pennywise the Clown from the movie IT. C) Police & firefighters. D) Elected officials. Show Answer Correct Answer: D) Elected officials. 8. A general rise in overall prices is called: A) Consumer Price Index. B) Deflation. C) Federal Reserve. D) Inflation. Show Answer Correct Answer: D) Inflation. 9. What type of policy is the use of interest rates to control the economy? A) Demand side policy. B) Fiscal policy. C) Insurance policy. D) Monetary policy. Show Answer Correct Answer: D) Monetary policy. 10. Monetary policy decisions are decided by: A) Congress. B) Senate. C) The Fed. D) President. Show Answer Correct Answer: C) The Fed. 11. A budget deficit is likely to lead to A) Expand the economy due to an increase in AD. B) Contract the economy due to a fall in AD. C) A fall in national debt. D) A fall in inflation in the country. Show Answer Correct Answer: A) Expand the economy due to an increase in AD. 12. These are IOUs from the U.S. government to people that finance a little piece of the government's debt in exchange for a very small amount of interest A) Government Holdings. B) Government Credit. C) Government Bonds, or Securities. D) Government Cash. Show Answer Correct Answer: C) Government Bonds, or Securities. 13. The largest portion of revenue for the Federal Government comes from A) National Sales Tax. B) Federal income Tax. C) Transfer Payments. D) User fees. Show Answer Correct Answer: B) Federal income Tax. 14. This is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As this rises, every dollar you own buys a smaller percentage of a good or service. A) Recession. B) Inflation. C) Aggregate Demand. D) Demand. Show Answer Correct Answer: B) Inflation. 15. How are fiscal and monetary policies similar? A) They both use the same tools to fix economic problems. B) They both try to promote economic stability. C) They always must have Congressional approval before passing. D) They both are decided by a Board of Governors. Show Answer Correct Answer: B) They both try to promote economic stability. 16. Which is NOT a tool of monetary policy A) Reserve requirement. B) Open market operations. C) Discount rate. D) Tax policies. Show Answer Correct Answer: D) Tax policies. 17. Fiscal policy aims to influence the economic activity through the use of A) Money supply and interest rate. B) Exchange rate. C) Government spending and taxation. D) Direct and indirect taxation. Show Answer Correct Answer: C) Government spending and taxation. 18. When interest rates rise, the number of loans made by banks will A) Increase. B) Decrease. C) Be unaffected. D) None of above. Show Answer Correct Answer: B) Decrease. 19. The use of taxes and government spending to affect the economy A) Expansionary Policy. B) Fiscal Policy. C) Contractionary Policy. D) Monetary Policy. Show Answer Correct Answer: B) Fiscal Policy. 20. An increase in interest rates, used to reduce overspending in the economy, is an example of A) Fiscal policy. B) Tight monetary policy. C) Supply-side policy. D) Loose monetary policy. Show Answer Correct Answer: B) Tight monetary policy. 21. What would the political branches of government do to taxes during a period of high inflation? A) Does not have the ability to change them. B) Raise them. C) Lower them. D) Keep them the same. Show Answer Correct Answer: B) Raise them. 22. When the US is is making more money than it is spending, it is operating in a A) Interest. B) IOU. C) Surplus. D) Deficit. Show Answer Correct Answer: C) Surplus. 23. Which component of the Federal Reserve System holds the most power in regards to day to day monetary policy? A) The Board of governors. B) Congress and the President. C) The 12 District banks. D) The Federal Open Market Committee. Show Answer Correct Answer: D) The Federal Open Market Committee. 24. Open Market Operations is A) Buying and selling of government securities. B) Buying and selling of tax credits. C) Interest rates used when banks borrow from other banks. D) Least used tool of the FED. Show Answer Correct Answer: A) Buying and selling of government securities. 25. If the SARB raises interest rates to combat rapid inflation, what might be a negative outcome? A) The government would put a freeze on prices. B) Unemployment rates would rise. C) Taxes will rise. D) International trade would stop. Show Answer Correct Answer: B) Unemployment rates would rise. 26. Which of the following fiscal policy tools would decrease the national debt? A) Increase income taxes. B) Decrease money supply. C) Increase money supply. D) Decrease income taxes. Show Answer Correct Answer: A) Increase income taxes. 27. Which fiscal policy tool would be used if the economy were in a recession? A) Decrease reserve requirement. B) Increase individual tax rate. C) Sell bonds through open market operations. D) Increase government spending. Show Answer Correct Answer: D) Increase government spending. 28. The rate the Fed charges banks for a loan A) Reserve ratio. B) Prime rate. C) Discount rate. D) Federal fund rate. Show Answer Correct Answer: C) Discount rate. 29. Money has to be accepted by everyone. Accepted means A) Long lasting. B) Everyone agrees upon. C) Limited in supply. D) Easy to carry. Show Answer Correct Answer: B) Everyone agrees upon. 30. If the Federal Reserve wants interest rates to increase, how does that affect the size of the money supply? A) It increases the money supply. B) It decreases the money supply. C) It keeps the money supply the same size. D) None of above. Show Answer Correct Answer: B) It decreases the money supply. Next →Related QuizzesFiscal QuizzesEconomics QuizzesFiscal Policy Quiz 2Fiscal Policy Quiz 3Fiscal Policy Quiz 4Fiscal Policy Quiz 5Fiscal Policy Quiz 6Fiscal Policy Quiz 7Fiscal Policy Quiz 8Fiscal Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books