This quiz works best with JavaScript enabled. Home > Fiscal > Policy > Fiscal Policy – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Fiscal Policy Quiz 2 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What would the political branches of government do to taxes during a period of high inflation? A) Raise them. B) Lower them. C) Keep them the same. D) Does not have the ability to change them. Show Answer Correct Answer: A) Raise them. 2. When the US is is making more money than it is spending, it is operating in a A) Deficit. B) Surplus. C) Interest. D) IOU. Show Answer Correct Answer: B) Surplus. 3. 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. 4. 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. 5. If the SARB raises interest rates to combat rapid inflation, what might be a negative outcome? A) Unemployment rates would rise. B) Taxes will rise. C) The government would put a freeze on prices. D) International trade would stop. Show Answer Correct Answer: A) Unemployment rates would rise. 6. Which of the following fiscal policy tools would decrease the national debt? A) Increase income taxes. B) Decrease income taxes. C) Increase money supply. D) Decrease money supply. Show Answer Correct Answer: A) Increase income taxes. 7. 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. 8. The rate the Fed charges banks for a loan A) Discount rate. B) Federal fund rate. C) Reserve ratio. D) Prime rate. Show Answer Correct Answer: A) Discount rate. 9. Money has to be accepted by everyone. Accepted means A) Long lasting. B) Easy to carry. C) Limited in supply. D) Everyone agrees upon. Show Answer Correct Answer: D) Everyone agrees upon. 10. 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. 11. The following economic indicator gives the percentage of people who are looking for jobs but cannot find one. A) Consumer price index. B) Employment rate. C) Unemployment rate. D) Inflation rate. Show Answer Correct Answer: C) Unemployment rate. 12. Which economic theorist, the "Father of Modern Economics, " believes in using expansionary fiscal policy to battle recessionary periods? A) Thomas Malthus. B) Karl Marx. C) Adam Smith. D) John Maynard Keynes. Show Answer Correct Answer: D) John Maynard Keynes. 13. The primary risk of expansionary fiscal policy is A) Deflation. B) Increasing unemployment. C) Increasing the national debt. D) Decreasing aggregate demand. Show Answer Correct Answer: C) Increasing the national debt. 14. An example of a contractionary fiscal policy would be if: A) Taxes were cut. B) The government bailed out GM. C) The Fed decrease the fed funds rate. D) Taxes were increased. Show Answer Correct Answer: D) Taxes were increased. 15. Contractionary monetary policy is sometimes called A) Decreasing money policy. B) Saving money policy. C) Slow money policy. D) Tight money policy. Show Answer Correct Answer: D) Tight money policy. 16. Reductions of combined consumer and producer surplus A) Deadweight loss. B) Elasticity. C) Tax incidence. D) Surplus. Show Answer Correct Answer: A) Deadweight loss. 17. Discretionary Fiscal Policy A) Changes in government spending or taxes that destabilize the economy. B) Changes in taxes and government spending made by Congress to stabilize the economy. C) Changes in taxes and transfers that occur as GDP changes. D) Policies that are already in place. Show Answer Correct Answer: B) Changes in taxes and government spending made by Congress to stabilize the economy. 18. Which of the following would be an expansionary fiscal policy (increasing economic growth)? A) Lowering income tax. B) Raising the value of £. C) Printing money. D) Lowering government expenditure (spending). Show Answer Correct Answer: A) Lowering income tax. 19. How does someone become a member of the Board of Governors? A) Appointed by Congress. B) Nominated by President. C) Voted on by American citizens. D) Chosen by the Chairman of the Fed. Show Answer Correct Answer: B) Nominated by President. 20. How does a government make money? A) Profit. B) Taxes. C) Selling goods. D) Producing a product. Show Answer Correct Answer: B) Taxes. ← PreviousNext →Related QuizzesFiscal QuizzesFiscal Policy Quiz 1Fiscal Policy Quiz 3Fiscal Policy Quiz 4Fiscal Policy Quiz 5Fiscal Policy Quiz 6Fiscal Policy Quiz 7Fiscal Policy Quiz 8Fiscal Policy Quiz 9Fiscal Policy Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books