Introduction to Fiscal Policy Practice Questions | Marginal Revolution University

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Introduction to Fiscal Policy Practice Questions

For the following scenarios, identify what type of fiscal policy phenomenon is being described.

1. The government hires 2000 workers for new infrastructure projects. Over half of the newly hired construction workers, however, were employed in other sectors of the economy and quit their jobs to take this better paying opportunity. *

a. Expansionary fiscal policy.

b. Contractionary fiscal policy.

c. Crowding out.

d. Fiscal multiplier.

e. a and c only.

f. a and d only.

2. The government increases taxes on corporations. *

a. Expansionary fiscal policy.

b. Contractionary fiscal policy.

c. Crowding out.

d. Fiscal multiplier.

e. a and c only.

f. a and d only.

3. During a recession, the government increases spending by $300B, which in turn increases GDP by $350B. *

a. Expansionary fiscal policy.

b. Contractionary fiscal policy.

c. Crowding out.

d. Fiscal multiplier.

e. a and c only.

f. a and d only.

4. During a recession, the government sends $500 checks to every American family. 70% of American families save the money or use it to pay off their debt. *

a. Expansionary fiscal policy.

b. Contractionary fiscal policy.

c. Crowding out.

d. Fiscal multiplier.

e. a and c only.

f. a and d only.

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Principles of Economics: Macroeconomics

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