Q. What is the effect of contractionary fiscal policy?
A.
Increased inflation
B.
Decreased unemployment
C.
Reduced government spending
D.
Increased consumer confidence
Show solution
Solution
Contractionary fiscal policy involves reducing government spending, which can help control inflation but may also lead to higher unemployment.
Correct Answer:
C
— Reduced government spending
Learn More →
Q. What is the impact of a balanced budget on the economy?
A.
Stimulates economic growth
B.
Reduces public debt
C.
Increases inflation
D.
Decreases government services
Show solution
Solution
A balanced budget, where government spending equals revenue, can help reduce public debt and maintain fiscal stability.
Correct Answer:
B
— Reduces public debt
Learn More →
Q. What is the role of automatic stabilizers in fiscal policy?
A.
To increase taxes during a recession
B.
To decrease government spending during a boom
C.
To automatically adjust government spending and taxes
D.
To eliminate budget deficits
Show solution
Solution
Automatic stabilizers, such as unemployment benefits and progressive taxes, automatically adjust government spending and taxes in response to economic conditions.
Correct Answer:
C
— To automatically adjust government spending and taxes
Learn More →
Q. Which financial instrument is commonly used by governments to finance budget deficits?
A.
Stocks
B.
Bonds
C.
Mutual funds
D.
Derivatives
Show solution
Solution
Governments typically issue bonds to finance budget deficits, as they are a way to borrow money from investors.
Correct Answer:
B
— Bonds
Learn More →
Q. Which fiscal policy tool can be used to stimulate economic growth?
A.
Increasing taxes
B.
Decreasing government spending
C.
Increasing government spending
D.
Reducing interest rates
Show solution
Solution
Increasing government spending is a fiscal policy tool that can stimulate economic growth by boosting demand.
Correct Answer:
C
— Increasing government spending
Learn More →
Q. Which of the following is NOT a function of the Reserve Bank of India (RBI)?
A.
Issuing currency
B.
Managing foreign exchange
C.
Setting fiscal policy
D.
Regulating banks
Show solution
Solution
Setting fiscal policy is not a function of the RBI; it is primarily responsible for monetary policy and regulating the banking sector.
Correct Answer:
C
— Setting fiscal policy
Learn More →
Showing 1 to 6 of 6 (1 Pages)
