Do You Know The Fiscal Policy?

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Questions: 10 | Attempts: 170 | Updated: Mar 21, 2023

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Fiscal policy is the utilization of government funds/revenue to influence the economy. Obviously, this is in a good way, as any change, whether huge or small in taxation, and thus, demand, leads to adjustment in national economy. Essentially, fiscal policy is used to stabilize the nation's economy, and it's meant to go on for a long time.

Questions and Answers

1.

How many stances of fiscal policy exists?
- A.
  
  1
- B.
  
  2
- C.
  
  3
- D.
  
  4
Correct Answer
C. 3

Explanation
There are three stances of fiscal policy. These stances include expansionary, contractionary, and neutral. Expansionary fiscal policy involves increasing government spending and decreasing taxes to stimulate economic growth. Contractionary fiscal policy involves decreasing government spending and increasing taxes to slow down the economy and control inflation. Neutral fiscal policy aims to maintain a stable economy without any major changes in government spending or taxes.

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1
1
2.

Which out of the following isn't one of the stances?
- A.
  
  Contractionary Fiscal Policy
- B.
  
  Expansionary Fiscal Policy
- C.
  
  Distributive Fiscal Policy
- D.
  
  Neutral Fiscal Policy
Correct Answer
C. Distributive Fiscal Policy

Explanation
Distributive Fiscal Policy is not one of the stances because it is not a recognized fiscal policy stance. The other three options, Contractionary Fiscal Policy, Expansionary Fiscal Policy, and Neutral Fiscal Policy, are all well-known fiscal policy stances that governments can adopt to manage their economies. Contractionary Fiscal Policy aims to reduce aggregate demand to control inflation, while Expansionary Fiscal Policy aims to stimulate economic growth by increasing government spending or reducing taxes. Neutral Fiscal Policy, on the other hand, involves maintaining a balanced budget without actively trying to stimulate or contract the economy.

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1
0
3.

Which of the stances occurs when the economy is neither unflattering or a boon?
- A.
  
  Neutral Fiscal Policy
- B.
  
  Cyclic Fiscal Policy
- C.
  
  Expansionary Fiscal Policy
- D.
  
  Contractionary Fiscal Policy
Correct Answer
A. Neutral Fiscal Policy

Explanation
Neutral Fiscal Policy occurs when the economy is neither unflattering nor a boon. This means that the government does not take any significant action to stimulate or restrict economic growth. It maintains a balanced approach, neither increasing government spending nor reducing it. This policy is often adopted when the economy is already stable and does not require any intervention. It aims to maintain the status quo and avoid any major disruptions in the economy.

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4.

Which of the fiscal policy stances should be used during a recession?
- A.
  
  Cyclic
- B.
  
  Neutral
- C.
  
  Contractionary
- D.
  
  Expansionary
Correct Answer
D. Expansionary

Explanation
During a recession, the economy experiences a decline in economic activity, such as a decrease in GDP and rise in unemployment. To counteract these negative effects, an expansionary fiscal policy stance should be used. This involves increasing government spending and/or reducing taxes to stimulate economic growth and increase aggregate demand. By injecting more money into the economy, expansionary fiscal policy aims to boost consumer spending, encourage business investment, and create jobs, thus helping to lift the economy out of recession.

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1
0
5.

In how many ways can funds be gotten for government expenditures?
- A.
  
  1
- B.
  
  3
- C.
  
  5
- D.
  
  7
Correct Answer
C. 5

Explanation
There are five possible ways in which funds can be obtained for government expenditures. These could include taxation, borrowing from international organizations or other countries, issuing government bonds, printing money, or receiving grants or aid from other countries.

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1
0
6.

Which of the following isn't a function of fiscal policy?
- A.
  
  Minimizing Employment For A Short Time
- B.
  
  Short-Term Stabilization
- C.
  
  Longer-Term Development
- D.
  
  Allocating And Distributing Resources
Correct Answer
A. Minimizing Employment For A Short Time

Explanation
Fiscal policy refers to the use of government spending and taxation to influence the economy. It is typically used to achieve certain economic goals such as stabilizing the economy in the short term, promoting long-term development, and efficiently allocating and distributing resources. However, minimizing employment for a short time is not a function of fiscal policy. Fiscal policy aims to create employment opportunities and stimulate economic growth, rather than reducing employment.

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7.

Other than fiscal policy, how many ways are available to fix the economy?
- A.
  
  3
- B.
  
  2
- C.
  
  1
- D.
  
  4
Correct Answer
C. 1

Explanation
There is only one way other than fiscal policy to fix the economy.

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8.

Under which of the following is fiscal policy administered?
- A.
  
  Marketers
- B.
  
  The Individual Senators
- C.
  
  A Central Bank
- D.
  
  Legislative Law
Correct Answer
D. Legislative Law

Explanation
Fiscal policy is the use of government spending and taxation to influence the economy. It is administered by the legislative law, which refers to the branch of government responsible for creating and passing laws. The legislative law determines the budget, tax rates, and government spending priorities, making it the appropriate entity to administer fiscal policy. Marketers, individual senators, and central banks do not have the authority to administer fiscal policy.

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1
0
9.

Which fiscal policy stance is used when the tax revenue is bigger than the government spending?
- A.
  
  Cyclic Fiscal Policy
- B.
  
  Contractionary Fiscal Policy
- C.
  
  Expansionary Fiscal Policy
- D.
  
  Neutral Fiscal Policy
Correct Answer
C. Expansionary Fiscal Policy

Explanation
When the tax revenue is bigger than the government spending, it indicates that the government is running a budget surplus. In this scenario, the government can use an expansionary fiscal policy to stimulate economic growth. This policy involves increasing government spending or reducing taxes to boost aggregate demand and encourage consumer and business spending. By injecting more money into the economy, the government aims to stimulate economic activity, create jobs, and increase overall output.

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10.

What is fiscal surplus?
- A.
  
  Nothing of Such Exists In Fiscal Policy
- B.
  
  It Happens When Government Policies Concerning Economy Is Surplus
- C.
  
  It Occurs When Revenue Is In Surplus
- D.
  
  It Happens When Revenue Is Small
Correct Answer
C. It Occurs When Revenue Is In Surplus

Explanation
A fiscal surplus occurs when the revenue generated by the government is greater than its expenses. This means that the government is earning more money than it is spending, resulting in a surplus. This surplus can be used to pay off debts, invest in infrastructure, or be saved for future use. It is a positive sign for the economy as it indicates financial stability and the ability to meet financial obligations.

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