Fiscal Policy: Spending — Quiz Answers

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1
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Which of these accurately explains the impact of an expansionary policy on interest rates, inflation, and unemployment?

A
Government spending with an expansionary policy can reduce interest rates and unemployment but can increase inflation.
B
Government spending with an expansionary policy can reduce inflation and interest rates but can increase unemployment.
C
Government spending with an expansionary policy can increase unemployment and interest rates but can reduce inflation.
D
Government spending with an expansionary policy can increase interest rates and inflation but can reduce unemployment.
2
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How does the policy that Gino is describing most likely affect interest rates and unemployment? Gino is writing a paper about the effects of fiscal policies on the economy. Gino is describing a fiscal policy that aims to improve inflation.

A
The policy would most likely increase unemployment but decrease interest rates.
B
The policy would most likely increase interest rates and unemployment.
C
The policy would most likely increase interest rates but decrease unemployment.
D
The policy would most likely decrease interest rates and unemployment.
3

What does deficit spending require a government to do?

A
lay off workers
B
hire more workers
C
take on debt
D
cut taxes
4

Which of these effects of expansionary spending would a government most want to avoid?

A
higher inflation
B
growth in consumer spending
C
higher employment
D
growth in production
5

Spending that is required by law is known as

A
mandatory spending.
B
deficit spending.
C
expansionary spending.
D
discretionary spending.
6

Read the passage. "Meeting the spending targets in this budget meant some very difficult choices." President Barack Obama, 2012 Budget Message of the President What did the president mean when he said he had to face “very difficult choices” when creating a federal budget?

A
deciding which country to borrow from to finance spending
B
deciding how to keep interest rates low on the national debt
C
deciding how much to increase tax rates
D
deciding what would be funded and what would be cut
7

Which of these statements most accurately describes the federal government and its employees?

A
The federal government is not allowed to hire employees.
B
The number of federal employees is too small to affect government spending.
C
The majority of Americans are employed by the federal government.
D
Millions of Americans work for the federal government.
8

What is the main goal in creating the federal budget?

A
finding a way to slow down rapid economic growth
B
managing businesses and increasing spending on all programs
C
finding a way to allow the economy to run on its own
D
deciding how to manage the government’s tax revenue and expenditures
9

When revenues are higher than expenditures in a budget, that budget

A
shows a deficit.
B
shows a surplus.
C
is in balance.
D
must be discarded.
10

When governments inject money into the economy, which of these are their goals? Choose four correct answers.

A
improving economic stability
B
encouraging competition
C
improving production
D
reducing unemployment
E
laying off striking workers

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