Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster)
Chapter 9

The Government and Fiscal Policy

9.1

Government in the Economy

1

Multiple Choice

1)

Fiscal policy refers to
A)

the techniques used by a business firm to reduce its tax liability.
B)

the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply.
C)

the spending and taxing policies used by the government to influence the economy.
D)

the government's ability to regulate a firm's behavior in the financial markets.
Answer:

C
Diff: 1
Topic:

Government in the Economy
Skill:

Definition

2)

Which of the following is NOT a category of fiscal policy?
A)

government policies regarding the purchase of goods and services
B)

government policies regarding taxation
C)

government policies regarding money supply in the economy
D)

government policies regarding transfer payments and welfare benefits
Answer:

C
Diff: 1
Topic:

Government in the Economy
Skill:

Conceptual
AACSB:

Reflective Thinking

3)

What determines tax revenues?
A)

the income tax rate
B)

the rate of interest
C)

the money supply in the economy
D)

the rate of inflation
Answer:

A
Diff: 2
Topic:

Government in the Economy
Skill:

Conceptual
AACSB:

Reflective Thinking

4)

Which of the following is INCORRECT regarding tax revenues?
A)

they increase during recessions
B)

they change with changes in the tax rate
C)

they are a revenue source in the government's budget
D)

they increase the rate of interest
Answer:

A
Diff: 2
Topic:

Government in the Economy
Skill:

Conceptual
AACSB:

Reflective Thinking

5)

During recessions, government spending usually
A)

decreases