This quiz works best with JavaScript enabled. Home > Fiscal > Policy > Fiscal Policy – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Fiscal Policy Quiz 1 (20 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 taxes. C) Increase reserve requirement. D) Increase discount rate. Show Answer Correct Answer: A) Increase spending. 4. Which of the following is expansionary policy? A) Selling bonds. B) Increase fed fund rate. C) Decrease discount rate. D) Increase required reserves. Show Answer Correct Answer: C) 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) 3. B) 5. C) 7. D) 12. Show Answer Correct Answer: C) 7. 7. Who is in charge of managing fiscal policy? A) Elected officials. B) Mr. Covington. C) Police & firefighters. D) Pennywise the Clown from the movie IT. Show Answer Correct Answer: A) Elected officials. 8. A general rise in overall prices is called: A) Deflation. B) Inflation. C) Consumer Price Index. D) Federal Reserve. Show Answer Correct Answer: B) 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 Bonds, or Securities. B) Government Credit. C) Government Cash. D) Government Holdings. Show Answer Correct Answer: A) Government Bonds, or Securities. 13. The largest portion of revenue for the Federal Government comes from A) User fees. B) Federal income Tax. C) National Sales Tax. D) Transfer Payments. 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) Open market operations. B) Tax policies. C) Reserve requirement. D) Discount rate. Show Answer Correct Answer: B) 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) Monetary Policy. B) Fiscal Policy. C) Contractionary Policy. D) Expansionary 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. 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