Title: QUIZ: Fiscal Policy: Tools for Influencing the Economy Module
Course: Recommended Resources for AP Macro from FRE > Section: Unit 3: National Income and Price Determination

Q: Which of the following is a significant decline in general economic activity over an extended period that includes declining real income and rising unemployment?
- A business cycle
- A recession
- A bubble
- A transfer program
A: A recession
If right: That is correct!
If wrong: That is incorrect. A recession is a significant decline in general economic activity over an extended period that includes declining real income and rising unemployment.

Q: Which of the following best defines inflation?
- The rapid increase in the price of a specific good, such as gasoline
- A general, sustained upward movement of prices for goods and services in an economy
- The fluctuation in revenue and expenditures caused by Congress and the president
- An increase in the national debt caused by ongoing deficit spending
A: A general, sustained upward movement of prices for goods and services in an economy
If right: That is correct!
If wrong: That is incorrect. Inflation is a general, sustained upward movement of prices for goods and services in an economy.

Q: If government is decreasing spending and increasing taxes to combat inflation, what type of policy is it conducting?
- Expansionary monetary policy
- Contractionary monetary policy
- Contractionary fiscal policy
- Expansionary fiscal policy
A: Contractionary fiscal policy
If right: That is correct!
If wrong: That is incorrect. If the government decreases spending and increases taxes, it is using contractionary fiscal policy.

Q: If unemployment is high, government policymakers might decide to do which of the following?
- Decrease the amount of funds in the economy available for loans
- Decrease government spending on goods and services
- Increase government spending on goods and services
- Raise taxes
A: Increase government spending on goods and services
If right: That is correct!
If wrong: That is incorrect. Government could use expansionary fiscal policy by increasing government spending on goods and services if unemployment was high.

Q: Which of the following is true of active fiscal policy actions?
- Policymakers can pinpoint the economic outcomes of their policies. 
- The political process makes it easy to pass needed actions in times of economic crisis.
- Economic conditions will stay the same without policymaker action.
- It is often difficult for policymakers to know whether their policies had any impact on the economy due to policy lags.
A: It is often difficult for policymakers to know whether their policies had any impact on the economy due to policy lags.
If right: That is correct!
If wrong: That is incorrect. Since the economy continues to change, it is difficult for policymakers to know if their decisions impacted the economy.

Q: Which of the following best describes automatic stabilizers?
- New government spending and tax policies that influence the economy immediately
- Government money spent to buy goods and services
- Standing policies that activate automatically without government intervention, usually during a recession
- Discretionary actions taken by Congress during an economic downturn
A: Standing policies that activate automatically without government intervention, usually during a recession
If right: That is correct!
If wrong: That is incorrect. Automatic stabilizers are a type of passive fiscal policy; they take effect without government intervention. Examples include Medicaid and food stamps (SNAP).

Q: If government is increasing spending and decreasing taxes, what type of policy is it conducting?
- Expansionary monetary policy
- Contractionary monetary policy
- Contractionary fiscal policy
- Expansionary fiscal policy
A: Expansionary fiscal policy
If right: That is correct!
If wrong: That is incorrect. If the government increases spending and lowers taxes, it is using expansionary fiscal policy.

Q: Congress might lower taxes if the economy appears to be in
- an expansion.
- a recession.
- a period of increased employment.
- a period of increasing GDP.
A: a recession.
If right: That is correct!
If wrong: That is incorrect. Congress might lower taxes in a recession.