01
True or false
1 point
True or false: In the United States, fiscal policy is determined primarily by Congress and the president, while monetary policy is conducted by the Federal Reserve.
Free Practice Quiz Question List
Fiscal Policy, Budgets, and Public Debt Online Quiz Questions
Use this free practice quiz with 20 questions to review Fiscal Policy, Budgets, and Public Debt, test your knowledge, and prepare for your next test or exam.
20 questions
02
Choose one
1 point
Which item is counted directly as government purchases in GDP?
- A
Public-school employee services
- B
Unemployment benefits
- C
Interest payments on government debt
- D
A tax refund
03
Fill in the blank
1 point
Complete both statements about an automatic response during a recession: Income-tax revenue tends to , while spending on unemployment insurance tends to .
04
Choose all
1 point
Which of the following are examples of automatic stabilizers? Select all correct choices.
- A
Progressive income taxes
- B
Unemployment insurance
- C
Means-tested transfers
- D
A newly enacted infrastructure program
05
True or false
1 point
True or false: A government budget deficit is a flow measured over a period, whereas public debt is a stock measured at a point in time.
- A
True
- B
False
06
Written response
1 point
A government collects 900 billion dollars in taxes, purchases 700 billion dollars of goods and services, and pays 150 billion dollars in transfers. What is its budget balance? Enter the number of billions of dollars; use a positive number for a surplus.
07
Choose one
1 point
An economy is experiencing excessive inflation and an unsustainable boom. Which fiscal action is most directly appropriate for reducing aggregate demand?
- A
Increase government purchases
- B
Decrease government purchases
- C
Increase transfer payments
- D
Decrease taxes
08
Fill in the blank
1 point
Complete both definitions: The time between recognizing an economic problem and taking policy action is the , while the time between implementing the policy and observing its full economic effect is the .
09
Choose all
1 point
Under which conditions is a fiscal multiplier more likely to be relatively large? Select all correct choices.
- A
The economy has substantial unused resources
- B
Monetary policy does not offset the fiscal expansion
- C
The policy is directed toward households with a high marginal propensity to consume
- D
The economy is already near full employment
10
Written response
1 point
In the simple closed-economy model, the marginal propensity to consume is 0.6. What is the government-purchases multiplier? Enter the multiplier as a number.
11
Choose one
1 point
Which expression best measures the public debt-to-GDP ratio?
- A
Public debt divided by the unemployment rate
- B
The annual budget deficit divided by public debt
- C
Public debt divided by nominal GDP, multiplied by 100
- D
Tax revenue divided by government purchases
12
Choose one
1 point
Why is the absolute value of the simple tax multiplier smaller than the government-purchases multiplier when the two policies have equal dollar sizes?
- A
Tax cuts always have no effect on aggregate demand
- B
Households generally save part of a tax cut
- C
Tax cuts are counted as government purchases in GDP
- D
Government purchases reduce household disposable income
13
Open ended
1 point
Explain when debt-financed government spending might improve long-run economic performance and when it might create significant economic risks. In your answer, discuss productive capacity, interest costs, crowding out, and debt sustainability.
14
Choose one
1 point
A state government with a balanced-budget requirement experiences a recession and falling tax revenue. What fiscal response is it most likely forced to consider, and why can that response be procyclical?
- A
It may have to cut spending or raise taxes during the downturn, which can further reduce aggregate demand and deepen the recession.
- B
It can always borrow freely to increase spending during the downturn.
- C
Its tax revenue automatically rises when unemployment rises.
- D
It is required to reduce spending only during expansions.
15
Choose one
1 point
An economy is in a recession, with real GDP below potential GDP. Which combination is most consistent with expansionary fiscal policy?
- A
Decrease government purchases and increase taxes
- B
Increase government purchases and decrease taxes
- C
Decrease government purchases and decrease transfer payments
- D
Increase taxes and decrease transfer payments
16
True or false
1 point
True or false: Transfer payments such as unemployment benefits are counted directly as government purchases in GDP.
- A
True
- B
False
17
Choose one
1 point
Which condition describes a government budget deficit using the simplified budget relationship?
- A
Tax revenue exceeds government purchases plus transfer payments
- B
Tax revenue equals government purchases plus transfer payments
- C
Government purchases plus transfer payments exceed tax revenue
- D
Government purchases exceed transfer payments and tax revenue
18
Written response
1 point
In the simple closed-economy model with no taxes, imports, or interest-rate effects, what is the government-purchases multiplier when the MPC is 0.75? Enter the multiplier as a number.
19
Choose one
1 point
Which scenario is the clearest example of an automatic stabilizer operating during a recession?
- A
A recession causes tax revenue to fall and unemployment-benefit spending to rise
- B
Congress passes a new infrastructure bill after a lengthy debate
- C
The central bank changes its policy interest rate
- D
The government deliberately raises tax rates during an expansion
20
Written response
1 point
In the simple model, what is the tax multiplier when the MPC is 0.8? Enter the multiplier as a number, including its sign.