Eco 111- Final questions with
complete solution 2025/2026
1. When the Federal government uses taxation and spending actions to stimulate the economy
it is conducting:
A. Fiscal policy
B. Incomes policy
C. Monetary policy
D. Employment policy - correct answer ✔✔A
2. Fiscal policy is enacted through changes in:
A. Interest rates and the price level
B. The supply of money and foreign exchange
C. Unemployment and inflation
D. Taxation and government spending - correct answer ✔✔D
3. The group that often initiates changes in fiscal policy is the:
A. Congressional Budget Office
B. Council of Economic Advisors
C. Joint Economic Committee
D. Federal Reserve Board - correct answer ✔✔B
4. If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this
would be an example of a(n):
A. Supply-side fiscal policy
,B. Expansionary fiscal policy
C. Contractionary fiscal policy
D. Nondiscretionary fiscal policy - correct answer ✔✔C
5. The goal of expansionary fiscal policy is to increase:
A. The price level
B. Aggregate supply
C. Real GDP
D. Unemployment - correct answer ✔✔C
6. If the government wishes to increase the level of real GDP, it might reduce:
A. Taxes
B. Transfer payments
C. The size of the budget deficit
D. Its purchases of goods and services - correct answer ✔✔A
7. The economy starts out with a balanced Federal budget. If the government then implements
expansionary fiscal policy, then there will be a:
A. Trade deficit
B. Trade surplus
C. Budget deficit
D. Budget surplus - correct answer ✔✔C
8. Which of the following serves as an automatic stabilizer in the economy?
A. Interest rates
B. Exchange rates
, C. The inflation rate
D. The progressive income tax - correct answer ✔✔D
9. Most economists believe that fiscal policy is:
A. Better than monetary policy for "fine-tuning" the economy
B. Better than monetary policy for month-to-month stabilization
C. Not as good as monetary policy for month-to-month stabilization
D. Not very good at pushing the economy in a particular direction - correct answer ✔✔C
10. Assume the economy is at full employment but planned investment exceeds saving. Other
things being equal, what fiscal policy actions would best address this problem?
A. Increase taxes and government spending
B. Decrease taxes and government spending
C. Decrease taxes and increase government spending
D. Increase taxes and decrease government spending - correct answer ✔✔D
11. To track the public debt over time and understand its significance to the economy, it is best:
A. Examined relative to budget surpluses
B. Calculated relative to the money supply
C. Measured relative to the gross domestic product
D. To compare it to imports, exports, and the trade deficit - correct answer ✔✔C
12. Which of the following nations had the highest public sector debt as a percent of GDP in
2009?
A. The U.S.
B. Japan
C. The U.K.
complete solution 2025/2026
1. When the Federal government uses taxation and spending actions to stimulate the economy
it is conducting:
A. Fiscal policy
B. Incomes policy
C. Monetary policy
D. Employment policy - correct answer ✔✔A
2. Fiscal policy is enacted through changes in:
A. Interest rates and the price level
B. The supply of money and foreign exchange
C. Unemployment and inflation
D. Taxation and government spending - correct answer ✔✔D
3. The group that often initiates changes in fiscal policy is the:
A. Congressional Budget Office
B. Council of Economic Advisors
C. Joint Economic Committee
D. Federal Reserve Board - correct answer ✔✔B
4. If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this
would be an example of a(n):
A. Supply-side fiscal policy
,B. Expansionary fiscal policy
C. Contractionary fiscal policy
D. Nondiscretionary fiscal policy - correct answer ✔✔C
5. The goal of expansionary fiscal policy is to increase:
A. The price level
B. Aggregate supply
C. Real GDP
D. Unemployment - correct answer ✔✔C
6. If the government wishes to increase the level of real GDP, it might reduce:
A. Taxes
B. Transfer payments
C. The size of the budget deficit
D. Its purchases of goods and services - correct answer ✔✔A
7. The economy starts out with a balanced Federal budget. If the government then implements
expansionary fiscal policy, then there will be a:
A. Trade deficit
B. Trade surplus
C. Budget deficit
D. Budget surplus - correct answer ✔✔C
8. Which of the following serves as an automatic stabilizer in the economy?
A. Interest rates
B. Exchange rates
, C. The inflation rate
D. The progressive income tax - correct answer ✔✔D
9. Most economists believe that fiscal policy is:
A. Better than monetary policy for "fine-tuning" the economy
B. Better than monetary policy for month-to-month stabilization
C. Not as good as monetary policy for month-to-month stabilization
D. Not very good at pushing the economy in a particular direction - correct answer ✔✔C
10. Assume the economy is at full employment but planned investment exceeds saving. Other
things being equal, what fiscal policy actions would best address this problem?
A. Increase taxes and government spending
B. Decrease taxes and government spending
C. Decrease taxes and increase government spending
D. Increase taxes and decrease government spending - correct answer ✔✔D
11. To track the public debt over time and understand its significance to the economy, it is best:
A. Examined relative to budget surpluses
B. Calculated relative to the money supply
C. Measured relative to the gross domestic product
D. To compare it to imports, exports, and the trade deficit - correct answer ✔✔C
12. Which of the following nations had the highest public sector debt as a percent of GDP in
2009?
A. The U.S.
B. Japan
C. The U.K.
