Chapter 15 Fiscal Policy

1) What are the two tools of fiscal policy that governments can use to stabilize an economy?

A) government spending and technology improvements

B) government spending and taxation

C) taxation and controlling imports

D) taxation and controlling exports

2) Contractionary policies are policies designed to

A) increase the level of real GDP.

B) reduce the level of real GDP.

C) increase government spending.

D) increase the federal deficit.

3) Expansionary policies are policies designed to

A) increase the level of real GDP.

B) reduce the level of real GDP.

C) decrease government spending.

D) reduce the federal deficit.

4) What are the two tools of fiscal policy that governments can use to affect the level of aggregate demand?

A) government spending and taxation

B) government spending and technology improvements

C) taxation and controlling imports

D) taxation and controlling exports

5) In order to ________, a government must increase spending and decrease taxation.

A) increase aggregate demand

B) decrease aggregate demand

C) increase aggregate supply

D) decrease aggregate supply

6) In order to ________, a government must decrease spending and increase taxation.

A) increase aggregate demand

B) decrease aggregate demand

C) increase aggregate supply

D) decrease aggregate supply

7) As a result of an increase in the personal income tax rate, consumers are likely to

A) spend less.

B) spend more.

C) save more.

D) earn more money.

8) A decrease in the personal income tax rate ________ disposable income which ________ consumption.

A) increases; increases

B) increases; decreases

C) decreases; decreases

D) decreases; increases

9) Tax cuts aimed at businesses can stimulate

A) social spending.

B) private consumption.

C) investment spending.

D) net exports.

10) Expansionary policies are government policies that

A) increase aggregate supply.

B) decrease aggregate supply.

C) decrease aggregate demand.

D) increase aggregate demand.