This quiz works best with JavaScript enabled. Home > Economics > Fiscal > Policy > Fiscal Policy – Quiz 7 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Fiscal Policy Quiz 7 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken? A) Selling securities on the open market. B) Raising interest rates. C) Raising reserve requirements. D) Reducing government spending. Show Answer Correct Answer: D) Reducing government spending. 2. Defense, Education, Health Care, Welfare, Transportation, and Pension Sending is A) US Monetary Policy for 2012. B) Federal Expenditures in the US. C) Major SOources of Federal Revenue. D) Categories of Discretionary Spending. Show Answer Correct Answer: B) Federal Expenditures in the US. 3. What is an expansionary monetary policy? A) A decrease in the interest rate. B) A decrease in the rate of value added tax. C) An increase in the power of trade unions. D) An increase in the standard rate of income tax. Show Answer Correct Answer: A) A decrease in the interest rate. 4. Lower Income = Lower Taxes A) Regressive. B) Progressive. C) Proportional. D) None of above. Show Answer Correct Answer: B) Progressive. 5. Given that the reserve ratio is 2, 5%, the size of the credit multiplier is A) 40. B) 4. C) 25. D) 2, 5. Show Answer Correct Answer: A) 40. 6. Tax avoidance is ..... A) Illegal. B) When low earners do not have to pay tax. C) Legal but frowned upon. D) When you miss the self-assessment deadline. Show Answer Correct Answer: C) Legal but frowned upon. 7. This is a tax that where you pay more the more money you make A) Proportional. B) Flat. C) Progressive. D) Regressive. Show Answer Correct Answer: C) Progressive. 8. The government can use a ..... to reduce its debt. A) Shortage. B) Deficit. C) Surplus. D) Loan. Show Answer Correct Answer: C) Surplus. 9. Fiscal policy can be used to achieve economic growth by: A) Increasing government spending and increasing tax. B) Increasing government spending and decreasing tax. C) Decreasing government spending and increasing tax. D) Decreasing government spending and decreasing tax. Show Answer Correct Answer: B) Increasing government spending and decreasing tax. 10. Why might using contractionary fiscal or monetary policy be risky? A) It can cause inflation. B) It could lower taxes. C) It could create a recession. D) It could raise aggregate demand too much. Show Answer Correct Answer: C) It could create a recession. 11. Government policies to try and increase the output of the economy in times of recession/contraction by decreasing taxes or increasing spending. A) Expansionary Fiscal Policy. B) Contractionary Fiscal Policy. C) Demand-Side Economics. D) Supply-Side Economics. Show Answer Correct Answer: A) Expansionary Fiscal Policy. 12. Which is an example of expansionary fiscal policy? A) The Federal reserve lowers the discount rate. B) The government raises taxes on all citizens by 5%. C) The government increases spending by building more infrastructure. D) The federal reserve increases the reserve requirement. Show Answer Correct Answer: C) The government increases spending by building more infrastructure. 13. The organization responsible for the monetary policy of the United States is A) Treasury Department. B) Executive Department. C) Congress. D) Federal Reserve. Show Answer Correct Answer: D) Federal Reserve. 14. A proportional tax ..... A) Has the same rate of tax on all income levels. B) Is proportionately smaller for low income earners. C) Is small in proportion to a regressive tax. D) Is always more effective than other taxes. Show Answer Correct Answer: A) Has the same rate of tax on all income levels. 15. Which answer below is something that the FED does NOT do? Remember, the FED has three main fiscal tools to impact money supply. A) Increase/decrease reserve requirement. B) Buy/sell bonds. C) Increase/decrease income tax rates. D) Increase/decrease discount rate. Show Answer Correct Answer: C) Increase/decrease income tax rates. 16. What is NOT a consequence of expansionary fiscal policy? A) Increased output. B) Increased unemployment. C) AD shifts Right. D) Increased Price levels. Show Answer Correct Answer: B) Increased unemployment. 17. A tax cut is likely to be less effective in helping the poor because A) It causes inflation. B) It causes the lorenz curve to shift to the right. C) Low income people are less likely to have the benefit of a marginal tax cut. D) None of above. Show Answer Correct Answer: C) Low income people are less likely to have the benefit of a marginal tax cut. 18. Which of the following best defines "gift tax" ? A) Tax on people's earnings. B) Tax on donation of money or wealth. C) Tax on the transfer of property when someone dies. D) Tax on the manufacture or sale of certain items. Show Answer Correct Answer: B) Tax on donation of money or wealth. 19. Which answer below is something that the FED does NOT do? A) Increase/decrease discount rate/fed funds rate. B) Increase/decrease reserve requirement. C) Increase/decrease income tax rates. D) Buy/sell bonds. Show Answer Correct Answer: C) Increase/decrease income tax rates. 20. Which best describes "expansionary fiscal policy" ? A) Increasing government spending and lowering taxes. B) Decreasing government spending and increasing taxes. C) Increasing government spending and increasing taxes. D) Decreasing government spending and lowering taxes. Show Answer Correct Answer: A) Increasing government spending and lowering taxes. 21. How much money must the bank keep on hand if the required reserve is 20% and there is a deposit of R1 000? A) 20. B) 200. C) 50. D) 1020. Show Answer Correct Answer: B) 200. 22. What is surplus? A) Having a balanced amount of money. B) Having a credit line. C) Having an excess of money. D) Having a limited amount of money. Show Answer Correct Answer: C) Having an excess of money. 23. What would the political branches of government do to spending during a period of high inflation? A) Does not have the ability to change it. B) Raise it. C) Keep it the same. D) Lower it. Show Answer Correct Answer: D) Lower it. 24. A deficit budget is one where A) Spending on imports exceeds export earnings. B) Government revenue exceeds government revenue. C) Government revenue is less than government spending. D) Spending on imports is less than export earnings. Show Answer Correct Answer: C) Government revenue is less than government spending. 25. The MPC is .75. Congress increase government spending by $ 100 billion and increases taxes by $ 100 billion. The GDP A) Increases by $ 800 billion. B) Decreases by $ 800 billion. C) Remains the same. D) Increases by $ 100 billion. Show Answer Correct Answer: D) Increases by $ 100 billion. 26. Kacie puts money in a savings account so she will have future purchasing power. Which function is money serving here? A) Medium of exchange. B) Unit of account. C) Standard of value. D) Store of value. Show Answer Correct Answer: D) Store of value. 27. Refers to government revenue, spending, and debt A) Fiscal. B) Reserve system. C) Fractional Reserve Banking. D) Legal Reserves. Show Answer Correct Answer: A) Fiscal. 28. The impact lag for fiscal policy is A) Shorter than for monetary policy. B) Longer than for monetary policy. C) About the same as for monetary policy. D) Long and indeterminate. Show Answer Correct Answer: A) Shorter than for monetary policy. 29. Which best describes "contractionary fiscal policy" ? A) Increasing government spending and lowering taxes. B) Decreasing government spending and increasing taxes. C) Increasing government spending and increasing taxes. D) Decreasing government spending and lowering taxes. Show Answer Correct Answer: B) Decreasing government spending and increasing taxes. 30. The amount of money the US government borrows to fund the national budget is the annual ..... A) Revenue. B) Debt. C) Deficit. D) Receipt. Show Answer Correct Answer: C) Deficit. ← PreviousNext →Related QuizzesFiscal QuizzesEconomics QuizzesFiscal Policy Quiz 1Fiscal Policy Quiz 2Fiscal Policy Quiz 3Fiscal Policy Quiz 4Fiscal Policy Quiz 5Fiscal Policy Quiz 6Fiscal Policy Quiz 8Fiscal Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books