If the government increases taxes and decreases government spending, it is implementing:
Contractionary fiscal policy
Expansionary fiscal policy
Contractionary monetary policy
Expansionary monetary policy
Correct Answer :
A. Contractionary fiscal policy
Related Questions
The term circular flow of income refers to:
The continuous flow of goods and services between households and firms in an economy
The circular flow of money between households and firms in an economy
The circular flow of resources between households and firms in an economy
The circular flow of exports and imports in an open economy
Which of the following is a measure of the overall level of prices in an economy?
Consumer Price Index (CPI)
Gross Domestic Product (GDP)
Money Supply (M2)
Aggregate Demand (AD)
If the government runs a budget deficit, it means that:
Government spending exceeds government revenue
Government revenue exceeds government spending
Government revenue and spending are equal
Taxes are too high
Which of the following is a measure of the responsiveness of quantity demanded to a change in price?
Price elasticity of demand
Cross-price elasticity of demand
Income elasticity of demand
Price elasticity of supply
The term complementary input refers to inputs that are:
Used together in the production process
Used interchangeably in the production process
Completely unrelated in the production process
Unrelated to the production process
The term Phillips curve depicts the relationship between:
Inflation and unemployment
Government spending and taxes
Savings and investment
Consumption and income
The term tax incidence refers to:
The way in which the burden of a tax is shared between buyers and sellers in a market
The total amount of revenue collected by the government from taxes
The impact of a tax on the overall level of prices in an economy
The distribution of income among different households in an economy
The Federal Reserve's main tool for controlling the money supply is:
Open market operations
Reserve requirements
Discount rates
Government spending
The term marginal cost refers to:
The additional cost of producing one more unit of a good or service
The total cost of producing a given quantity of a good or service
The average cost of producing all units of a good or service
The fixed cost of producing a given quantity of a good or service
The natural rate of unemployment is:
The level of unemployment that occurs when the economy is at full employment
The level of unemployment that occurs when the economy is in a recession
The level of unemployment that occurs when there is no frictional or structural unemployment
The level of unemployment that occurs when there is no cyclical unemployment
The term externalities refers to:
The uncompensated impact of one person's actions on the well-being of a bystander
The difference between the private cost and the social cost of producing a good
The total cost incurred in producing a good or service
The total cost of producing all units of a good or service
The term sticky prices refers to:
Prices that do not change quickly in response to changes in supply and demand
Prices that are set by the government and cannot be changed by firms
Prices that are adjusted continuously in response to changes in the economy
Prices that are set by monopolies to maximize profit
The multiplier effect refers to:
The impact of an initial change in spending on aggregate demand and, consequently, on real GDP
The tendency of consumers to save a large portion of their income
The effect of an increase in the money supply on interest rates
The impact of inflation on purchasing power
The term monetary base refers to:
The total amount of money in circulation in an economy
The total amount of money held by banks as reserves
The total amount of money held by households and businesses
The total amount of money created by the central bank
The concept of crowding out refers to:
The decrease in private spending that occurs as a result of an increase in government spending
The increase in private investment that occurs as a result of government borrowing
The decrease in government spending that occurs during a recession
The increase in government spending that occurs during a boom
The Phillips curve depicts the relationship between:
Inflation and unemployment
Government spending and taxes
Savings and investment
Consumption and income
In macroeconomics, the term inflation refers to:
An increase in the overall price level of goods and services in an economy
A decrease in the overall price level of goods and services in an economy
An increase in the purchasing power of a currency
A decrease in the purchasing power of a currency
The term economic rent refers to:
Payment for the use of land or other natural resources that is in excess of what is needed to bring the resource into production
The payment for the use of capital goods in production
The total revenue earned by a firm
The total cost of producing a good or service
The long-run aggregate supply curve is vertical because it is determined by:
The level of government spending
The level of potential output
The level of aggregate demand
The level of inflation
Which of the following is a component of aggregate supply?
Consumption
Government spending
Investment
Wages and salaries
The term market equilibrium refers to a situation where:
The quantity supplied is equal to the quantity demanded in a market
The quantity supplied exceeds the quantity demanded in a market
The quantity demanded exceeds the quantity supplied in a market
The price level is constant in a market
The term liquidity refers to:
The ease with which an asset can be converted into cash without loss of value
The total amount of money in circulation in an economy
The total amount of money held by households and businesses
The total amount of money held by banks as reserves
The term real wage rate refers to:
The purchasing power of wages after accounting for inflation
The nominal wage rate adjusted for taxes
The average wage rate in an economy
The wage rate set by the government
The term opportunity cost refers to:
The value of the next best alternative that must be forgone when a decision is made to allocate resources to a particular use
The total cost incurred in producing a good or service
The cost incurred when a firm decides to shut down operations
The cost of goods and services in an open economy
The term capital stock in economics refers to:
The total amount of money in an economy
The total value of physical and human capital in an economy
The total amount of money held by households
The total amount of money held by businesses
Which of the following is an example of fiscal policy?
The Federal Reserve adjusting interest rates
The government increasing spending on infrastructure projects
The government selling bonds to the public
The central bank conducting open market operations
The term real interest rate is:
The nominal interest rate adjusted for inflation
The interest rate charged by banks on loans
The interest rate earned on a savings account
The interest rate set by the central bank
The term fractional reserve banking refers to:
A system in which banks are required to hold a fraction of their deposits in reserves
A system in which banks are required to hold all of their deposits in reserves
A system in which banks are not required to hold any reserves
A system in which banks are required to hold more than their deposits in reserves
The term inflationary gap refers to a situation where:
Actual output is less than potential output
Actual output is greater than potential output
The inflation rate is high
The unemployment rate is low
Which of the following is a measure of income inequality?
Gini coefficient
Consumer Price Index (CPI)
Producer Price Index (PPI)
Lorenz curve