Practice Questions
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What is the primary goal of expansionary fiscal and monetary policies in relation to aggregate demand?
The main aim of these policies is to boost aggregate demand. Other options are incorrect because Some might think these policies lower demand, but the...
How does expansionary fiscal policy contribute to economic growth?
This policy helps the economy grow by increasing government spending and lowering taxes. Other options are incorrect because Some might think reducing...
How does expansionary monetary policy typically affect interest rates in an economy?
Expansionary monetary policy lowers interest rates. Other options are incorrect because Some think that raising interest rates controls inflation; It'...
How does an increase in the money supply, as a result of expansionary monetary policy, typically influence inflation rates in an economy experiencing a recession?
When more money is available, people can spend more. Other options are incorrect because Some might think that more money means lower prices; It's a c...
How does a central bank's decision to lower interest rates typically affect inflation in the economy?
When a central bank lowers interest rates, it makes loans cheaper. Other options are incorrect because This answer suggests that lower interest rates ...
What is the primary goal of expansionary fiscal policy?
The main aim of expansionary fiscal policy is to lower unemployment. Other options are incorrect because Some might think this policy is about reducin...
What is a primary tool of expansionary fiscal policy used by governments to stimulate economic growth?
When the government lowers taxes, people have more money to spend. Other options are incorrect because Some might think raising interest rates helps t...
Which of the following is a primary objective of implementing tax cuts as part of expansionary fiscal policy?
Tax cuts put more money in people's pockets. Other options are incorrect because Some think tax cuts increase government money; People might believe t...
Which of the following scenarios best exemplifies the application of expansionary fiscal policy?
When the government spends more money on things like roads and bridges, it creates jobs. Other options are incorrect because Raising interest rates ma...
How does expansionary fiscal policy primarily aim to stimulate the economy during a recession?
This policy helps by increasing government spending or cutting taxes. Other options are incorrect because Some might think raising interest rates help...
During a recession, the government may implement __________ to stimulate economic growth, which typically involves increasing spending or cutting taxes.
This policy helps boost the economy by increasing government spending or lowering taxes. Other options are incorrect because This approach actually sl...
During a recession, the government decides to implement an expansionary fiscal policy by increasing its spending on infrastructure projects. What is the most likely immediate effect of this policy on the economy?
When the government spends more on projects like roads and bridges, it creates jobs. Other options are incorrect because Some might think that governm...
What is the primary reason why expansionary fiscal policy can lead to an increase in the budget deficit?
When the government spends more money, it can create a budget deficit. Other options are incorrect because Some might think that higher taxes will red...
Expansionary fiscal policy is to increased government spending as expansionary monetary policy is to what?
When the government wants to boost the economy, it can lower interest rates. Other options are incorrect because Some might think that lowering taxes ...
Which of the following statements accurately describe the effects of expansionary fiscal and monetary policies? Select all that apply.
All the statements provided misunderstand how expansionary policies work. Other options are incorrect because Some might think that increasing governm...
Arrange the following steps in the correct order to illustrate how expansionary fiscal and monetary policies stimulate economic growth during a recession: A) Lower interest rates to encourage borrowing B) Increased government spending on infrastructure C) Higher aggregate demand due to increased consumption D) Improved economic growth and reduced unemployment
Lowering interest rates makes it cheaper to borrow money. Other options are incorrect because This order suggests spending happens before lowering int...
During a recession, which combination of policies would most effectively stimulate economic activity?
When the government spends more money, it creates jobs and helps businesses. Other options are incorrect because Higher taxes take money away from peo...
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