3.4-Policy Conflicts

Question 1

What is the primary goal of monetary policy?

Answer 1

To control inflation and stabilize the currency.

Question 2

True or False: Fiscal policy involves government spending and taxation decisions.

Answer 2

True

Question 3

Fill in the blank: The conflict between inflation and unemployment is known as the _______.

Answer 3

Phillips Curve

Question 4

What are the two main types of economic policies?

Answer 4

Monetary policy and fiscal policy.

Question 5

Multiple Choice: Which of the following is a tool of monetary policy?

Answer 5

Interest rates

Question 6

What is the aim of expansionary fiscal policy?

Answer 6

To stimulate economic growth.

Question 7

True or False: Contractionary policy is used to combat high inflation.

Answer 7

True

Question 8

What is a potential conflict between monetary policy and fiscal policy?

Answer 8

Monetary policy may aim to lower inflation while fiscal policy may aim to increase spending.

Question 9

Fill in the blank: The trade-off between controlling inflation and achieving full employment is known as the _______.

Answer 9

Policy dilemma

Question 10

Multiple Choice: Which of the following is NOT a goal of fiscal policy?

Answer 10

Regulating money supply

Question 11

What is the consequence of high government spending in an economy?

Answer 11

Potential increase in inflation.

Question 12

True or False: Lowering interest rates can lead to increased borrowing.

Answer 12

True

Question 13

What does the term ‘crowding out’ refer to?

Answer 13

When government spending reduces private sector investment.

Question 14

Fill in the blank: A decrease in taxes is an example of _______ policy.

Answer 14

Expansionary fiscal

Question 15

Multiple Choice: What is one effect of contractionary monetary policy?

Answer 15

Higher interest rates

Question 16

What does the term ‘stagflation’ mean?

Answer 16

A situation of stagnant economic growth combined with inflation.

Question 17

True or False: Supply-side policies aim to increase aggregate supply.

Answer 17

True

Question 18

What can result from conflicting monetary and fiscal policies?

Answer 18

Economic instability.

Question 19

Fill in the blank: The balance between inflation and unemployment is often represented by the _______.

Answer 19

Phillips Curve

Question 20

Multiple Choice: What is a common goal of both fiscal and monetary policy?

Answer 20

Economic stability

Question 21

What is the primary aim of contractionary fiscal policy?

Answer 21

To reduce inflation.

Question 22

True or False: Increasing taxes can lead to a decrease in consumer spending.

Answer 22

True

Question 23

What is the effect of expansionary monetary policy on unemployment?

Answer 23

It typically reduces unemployment.

Question 24

Fill in the blank: A rise in interest rates is often used to combat _______.

Answer 24

Inflation

Question 25

Multiple Choice: Which policy is typically more effective in the short term?

Answer 25

Fiscal policy

Question 26

What is the long-term goal of macroeconomic policy?

Answer 26

Sustained economic growth.

Question 27

True or False: Automatic stabilizers are government programs that automatically adjust with economic conditions.

Answer 27

True

Question 28

What does 'quantitative easing' refer to?

Answer 28

A monetary policy where central banks purchase securities to increase money supply.

Question 29

Fill in the blank: The _______ effect occurs when fiscal expansion leads to higher interest rates and reduced private investment.

Answer 29

Crowding out

Question 30

Multiple Choice: Which of the following is an example of contractionary fiscal policy?

Answer 30

Increasing taxes

Question 31

What is the role of the central bank in monetary policy?

Answer 31

To manage the money supply and interest rates.

Question 32

True or False: Fiscal policy can be used to influence economic activity.

Answer 32

True

Question 33

What is the impact of high inflation on purchasing power?

Answer 33

It decreases purchasing power.

Question 34

Fill in the blank: The _______ curve illustrates the trade-off between inflation and unemployment.

Answer 34

Phillips

Question 35

Multiple Choice: Which is a potential consequence of an expansive fiscal policy?

Answer 35

Increased national debt

Question 36

What is the primary purpose of supply-side policies?

Answer 36

To increase productivity and economic growth.

Question 37

True or False: Economic growth can lead to inflation if demand outpaces supply.

Answer 37

True

Question 38

What is a key characteristic of discretionary fiscal policy?

Answer 38

It requires active government intervention.

Question 39

Fill in the blank: The _______ model suggests that inflation is a result of demand exceeding supply.

Answer 39

Demand-pull

Question 40

Multiple Choice: Which policy can lead to a reduction in the budget deficit?

Answer 40

Contractionary fiscal policy