Fiscal Stimulus: Definition, Multiplier Effect & Price Levels


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Which of these government actions would be considered fiscal stimulus?

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1. Which of these describes the multiplier effect?

2. If there is a $75 million shortfall in aggregate demand, the amount of fiscal stimulus needed to close the shortfall is:

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About This Quiz & Worksheet

Fiscal stimulus is a governmental policy to spur economic activity. These multiple-choice questions will test how much you know about it, such as whether you can recognize a fiscal stimulus example and describe the multiplier effect.

Quiz & Worksheet Goals

Answer questions on the following:

  • Fiscal stimulus that can help with a $75 million shortfall in aggregate demand (AD)
  • Calculating fiscal stimulus based on AD and marginal propensity to consume (MPC)
  • Finding the appropriate reduction in tax rates given a desired fiscal stimulus and the MPC

Skills Practiced

  • Problem solving - use acquired knowledge to solve fiscal stimulus practice problems
  • Information recall - access the knowledge you've gained regarding what kind of government actions are forms of fiscal stimulus
  • Defining key concepts - ensure that you can accurately define main terms, such as the multiplier effect
  • Interpreting information - verify that you can read information about working with the AD and MPC and interpret it correctly

Additional Learning

Learn more about fiscal stimulus and how it's calculated with the lesson named Fiscal Stimulus: Definition, Multiplier Effect & Price Levels. These areas of study will be covered:

  • Definition of fiscal stimulus
  • Three sources of aggregate demand
  • Examples of fiscal stimulus policies