Fiscal Policy Tools: Government Spending and Taxes


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question 1 of 3

Which of the following statements is FALSE regarding the government's fiscal policy toolkit?

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1. _____ fiscal policy addresses a _____ economy, while _____ fiscal policy addresses an _____ economy.

2. Fiscal policy involves the use of _____ to influence _____.

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About This Quiz & Worksheet

The government has many fiscal policy tools at their disposal, and this quiz/worksheet combo will help test your understanding of the vocabulary surrounding this topic.

Quiz & Worksheet Goals

In these assessments you'll be tested on the definitions of:

  • Government spending
  • Recession
  • Fiscal policy

Skills Practiced

This quiz and worksheet allow students to test the following skills:

  • Making connections - use understanding of the concept of aggregate demand and how it can be expanded or contracted depending on governmental fiscal policy
  • Information recall - access the knowledge you've gained regarding how government spending should decrease or increase based on the amount of the demand present in the national economy.
  • Knowledge application - use your knowledge to answer questions about fiscal policy

Additional Learning

To learn more about the fiscal policy toolkit, review the accompanying lesson Fiscal Policy Tools: Government Spending and Taxes. This lesson covers the following objectives:

  • Understand how government spending, taxation and transfer payments influences aggregate demand and then, ultimately, Real GDP
  • Define expansionary and contractionary fiscal policy
  • Understand how engaging in an expansionary fiscal policy can be beneficial in an economy in recession.
  • Understand how engaging in an contractionary fiscal policy can be beneficial in an economy that is expanding too quickly thereby causing inflation, which negates many of the benefits of a highly productive economy.