Question 1

The purpose of fiscal policy is to
A) maintain price level stability.
B) achieve full employment.
C) promote economic growth.
D) All of the above answers are correct.

Accepted Answer

Fiscal policy can be used to achieve various objectives such as maintaining price level stability, promoting economic growth, and achieving full employment. Therefore, all the options given in the question are correct.

Question 2

Fiscal policy can be defined as
A) government policy with respect to transfer payments such as unemployment compensation and welfare.
B) government spending and tax decisions accomplished using automatic stabilizers.
C) use of the federal budget to reach macroeconomic objectives.
D) government policy to retire the federal government debt.

Accepted Answer

Fiscal policy refers to the use of government spending and taxation to influence the economy in order to achieve macroeconomic objectives such as stable prices, full employment, and economic growth. It involves decisions made by the government regarding its budget, and the ways in which it spends and taxes in order to achieve its economic goals. Transfer payments (A) and government debt retirement (D) are components of government spending but do not fully encompass fiscal policy. Automatic stabilizers (B) are a tool used within fiscal policy but do not fully define it.

Question 3

Prior to the Great Depression, the purpose of the federal budget was to _ .
A) finance the activities of the government
B) maintain low interest rates
C) stabilize the economy
D) decrease unemployment

Accepted Answer

Prior to the Great Depression, the purpose of the federal budget was simply to finance the activities of the government, such as funding infrastructure projects, maintaining a military, and providing basic public services. The focus was not on stabilizing the economy or decreasing unemployment.

Question 4

The use of the U.S. federal budget to help stabilize the economy grew in reaction to the and is known as .
A) stagflation of the 1970s; fiscal policy
B) Great Depression of the 1930s; fiscal policy
C) Great Depression of the 1930s; monetary policy
D) stagflation of the 1970s; government policy

Accepted Answer

The use of the U.S. federal budget to help stabilize the economy grew in reaction to the Great Depression of the 1930s, and this approach is known as fiscal policy.

Question 5

Fiscal policy includes
A) only decisions related to government expenditure on goods and services and the value of transfer payments.
B) only decisions related to government expenditure on goods and services.
C) only decisions related to the value of transfer payments and tax revenue.
D) decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.

Accepted Answer

Fiscal policy refers to the government's use of spending, taxation, and transfer payments to stimulate or slow down the economy. Therefore, it includes decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.

Question 6

Which branches of the government play a role in the enacting the federal budget?
I. the President.
II. the House of Representatives.
III. the Senate.
A) I only
B) I and II
C) II and III
D) I, II and III

Accepted Answer

The President proposes the federal budget and then the House of Representatives and the Senate make changes, debate, and ultimately pass a final version of the budget. The President can veto the budget, but Congress can override the veto with a two-thirds majority vote in both the House and the Senate. Therefore, all three branches of the government play a role in enacting the federal budget.

Question 7

Fiscal policy attempts to achieve all of the following objectives EXCEPT .
A) full employment
B) sustained economic growth
C) price level stability
D) a stable money supply

Accepted Answer

Fiscal policy focuses on government spending, taxation, and borrowing to influence economic conditions. It does not directly target the stability of the money supply, which is a function of monetary policy set by the central bank.

Question 8

Fiscal policy involves
A) the use of tax and money policies by government to influence the level of interest rates.
B) the use of tax and spending policies by the government.
C) decreasing the role of the Federal Reserve in the everyday life of the economy.
D) the use of interest rates to influence the level of GDP.

Accepted Answer

Fiscal policy involves the use of tax and spending policies by the government to influence the level of economic activity, including GDP, inflation, and employment. It is separate from monetary policy, which involves the use of interest rates and other tools by the Federal Reserve to influence the economy.

Question 9

In terms of the budget process, place the following events in order for fiscal year 2009.
I. Congress approves the budget.
II. The president sends a budget to Congress.
III. Supplementary budget laws are passed.
A) II, III, I
B) I, II, III
C) III, II, I
D) II, I, III

Accepted Answer

The budget process typically begins with the president sending a proposed budget to Congress (II), which then holds hearings and drafts its own budget resolution. After negotiations between the House and Senate, Congress ultimately approves the final budget (I). Supplementary budget laws (III) can be passed at any point during the fiscal year, as needed. Therefore, the correct order is II, I, III.

Question 10

The budget process includes the
A) President proposing and Congress passing the budget.
B) Senate proposing and the House of Representatives passing the budget.
C) President passing the budget as proposed by Congress.
D) House of Representatives proposing and the Senate passing the budget.

Accepted Answer

The budget process begins with the President proposing a budget to Congress. Congress then holds hearings, makes changes, and ultimately passes a budget resolution. The resolution sets overall spending limits but does not allocate specific funding to programs. The House of Representatives and Senate then pass individual appropriations bills that allocate funding to specific programs. The President must sign these bills into law for them to take effect. Therefore, the correct answer is A.

Question 11

Fiscal policy
A) is enacted by the Federal Reserve.
B) involves changing interest rates.
C) involves changing the money supply.
D) involves changing taxes and government spending.

Accepted Answer

Fiscal policy involves changing taxes and government spending. The other options (A, B, C) refer to monetary policy which is conducted by the Federal Reserve.

Question 12

Which of the following is included as part of fiscal policy?
A) the level of interest rates
B) money supply
C) the level of government spending
D) monetary policy

Accepted Answer

Fiscal policy refers to the government's decisions regarding its level of spending and taxation in order to influence economic activity. Therefore, the level of government spending is included as part of fiscal policy. The other choices, such as the level of interest rates and money supply, are more closely related to monetary policy.

Question 13

The largest item of government outlays is .
A) debt reduction
B) transfer payments
C) expenditures on goods and services
D) debt interest

Accepted Answer

Transfer payments, such as Social Security and Medicare, make up the largest portion of government outlays. In 2019, transfer payments made up 67% of all federal spending, while expenditures on goods and services only made up 15%. Debt reduction and interest payments on the national debt are also significant expenses, but not as large as transfer payments.

Question 14

The purpose of the Employment Act of 1946 was to
A) set targets for the unemployment rate to be achieved by the president.
B) establish an unemployment compensation system.
C) set up the Federal Reserve System.
D) establish goals for the federal government that would promote maximum employment, purchasing power, and production.

Accepted Answer

The Employment Act of 1946 was primarily designed to promote maximum employment, purchasing power, and production in the United States. It established goals for the federal government to achieve through economic policies and provided a framework for coordinating government and private sector efforts to maintain a stable economy. The act did not set targets for the unemployment rate, establish an unemployment compensation system, or set up the Federal Reserve System.

Question 15

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?
A) the Federal Reserve Board
B) the House of Representatives
C) the Senate
D) the President and his cabinet

Accepted Answer

The Federal Reserve Board, while it plays a significant role in monetary policy, does not directly participate in formulating U.S. fiscal policy. Fiscal policy involves decisions related to government spending, taxation, and borrowing, which are primarily made by Congress and the Executive branch.

Question 16

Tax cuts by the federal government to increase long term growth are known as
A) communism.
B) fiscal policy.
C) socialism.
D) monetary policy.

Accepted Answer

Tax cuts by the federal government to increase long term growth are a part of fiscal policy, which is the use of government spending and taxation to influence the economy. Communism and socialism refer to different economic systems, and monetary policy involves changes in interest rates and money supply controlled by the central bank to influence the economy.

Question 17

Which of the following is considered a purpose of the federal budget?
I. To help the economy achieve full employment.
II. To finance the activities of the federal government.
III. To promote sustained economic growth.
A) I and II
B) I and III
C) I, II and III
D) II and III

Accepted Answer

All three options are considered purposes of the federal budget. The budget is used to finance the activities of the federal government including supporting programs that promote full employment and sustained economic growth.

Question 18

The Employment Act of 1946 made it the responsibility of the federal government to
A) improve the distribution of income.
B) promote maximum employment.
C) balance its budget because that policy would create the maximum level of employment.
D) provide full employment and a stable balance of payments.

Accepted Answer

The Employment Act of 1946 made it the responsibility of the federal government to promote maximum employment. While improving the distribution of income and providing stability in the balance of payments were also important, the primary goal was to ensure maximum employment. Balancing the budget was not mentioned as part of the government's responsibility in this act.

Question 19

Changes in which of the following is included as part of fiscal policy?
A) the money supply
B) monetary policy
C) tax rates
D) the level of interest rates

Accepted Answer

Fiscal policy refers to changes in government spending and taxation policies. Tax rates are directly related to fiscal policy and therefore, a valid choice for this question. The money supply and level of interest rates are included in monetary policy, not fiscal policy.

Question 20

All of the following are part of fiscal policy EXCEPT
A) choosing the size of the government deficit.
B) controlling the money supply.
C) setting government spending.
D) setting tax rates.

Accepted Answer

Controlling the money supply is actually part of monetary policy, which is implemented by a central bank (such as the Federal Reserve in the US) and involves manipulating interest rates and other financial instruments to influence economic activity. Fiscal policy, on the other hand, involves decisions made by the government regarding taxation and spending policies to achieve certain economic objectives. The other options (A, C, and D) are all examples of fiscal policy.

Quiz 13: Fiscal Policy

The purpose of fiscal policy is to

Fiscal policy can be defined as

Prior to the Great Depression, the purpose of the federal budget was to _ .

The use of the U.S. federal budget to help stabilize the economy grew in reaction to the and is known as .

Fiscal policy includes

Which branches of the government play a role in the enacting the federal budget? I. the President. II. the House of Representatives. III. the Senate.

Fiscal policy attempts to achieve all of the following objectives EXCEPT .

Fiscal policy involves

In terms of the budget process, place the following events in order for fiscal year 2009. I. Congress approves the budget. II. The president sends a budget to Congress. III. Supplementary budget laws are passed.

The budget process includes the

Fiscal policy

Which of the following is included as part of fiscal policy?

The largest item of government outlays is .

The purpose of the Employment Act of 1946 was to

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

Tax cuts by the federal government to increase long term growth are known as

Which of the following is considered a purpose of the federal budget? I. To help the economy achieve full employment. II. To finance the activities of the federal government. III. To promote sustained economic growth.

The Employment Act of 1946 made it the responsibility of the federal government to

Changes in which of the following is included as part of fiscal policy?

All of the following are part of fiscal policy EXCEPT