Week 7 — Quiz · Fiscal Policy: Spending, Taxes, the Multiplier & the Deficit vs. the Debt
Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Objective 6 · 10 questions · 10 points · closed to AI · one attempt
Auto-graded (Classic QTI): see F-quiz-week-07-qti.xml for the Canvas import. Every numeric answer is pre-computed; every fiscal-policy claim is verified.
The questions (human-readable; answer key below)
Q1. Which of the following is an example of fiscal policy (as opposed to monetary policy)?
A) The Federal Reserve buys government bonds B) Congress passes a bill increasing infrastructure spending C) The Federal Reserve raises the reserve requirement D) The Federal Reserve raises the interest rate it pays on reserves
Q2. The economy is currently sitting in a recessionary gap (output below potential). Which is the correct expansionary fiscal-policy move?
A) Decrease government spending and raise taxes B) Increase government spending and/or decrease taxes C) Raise the reserve requirement D) Sell government bonds on the open market
Q3. If the marginal propensity to consume (MPC) is 0.8, the spending multiplier, 1/(1−MPC), equals —
A) 0.2 B) 1.25 C) 5 D) 8
Q4. Using a spending multiplier of 5, if the government increases spending by ΔG = $20 billion, the total change in real GDP (ΔY) is —
A) $5 billion B) $20 billion C) $25 billion D) $100 billion
Q5. (True/False) The formula 1/(1−MPC), the spending (fiscal) multiplier, is the same formula as 1/RR, the money multiplier. → False
Q6. A government collects $400 billion in revenue and spends $450 billion this year. This year's budget deficit is —
A) $50 billion B) $400 billion C) $450 billion D) $850 billion
Q7. A country's accumulated national debt was $1,000 billion at the start of the year. This year's deficit of $50 billion gets borrowed. The debt at the end of the year is —
A) $50 billion B) $950 billion C) $1,000 billion D) $1,050 billion
Q8. (Select all that apply.) Which of the following correctly describe automatic stabilizers?
☑ A) They expand or contract WITHOUT a new act of Congress ☐ B) They require the President to sign a new spending bill each time they activate ☑ C) Unemployment-insurance payments automatically rise in a downturn as more people qualify ☑ D) Tax revenue automatically falls in a downturn as incomes fall ☐ E) They are a tool of monetary policy, not fiscal policy
Q9. (Matching) Match each term to its correct description. Expansionary fiscal policy → Increase government spending and/or cut taxes to fight a recessionary gap; Contractionary fiscal policy → Decrease government spending and/or raise taxes to fight an inflationary gap; Automatic stabilizer → A fiscal mechanism that expands or contracts without a new law; Budget deficit → This year's shortfall when spending exceeds revenue (a flow). (Distractor: "The accumulated total of every unpaid past deficit (a stock)" — describes the debt, not the deficit.)
Q10. A recession is deepening, and the government is debating an increase in spending. One economist argues this spending will be largely offset because it will push up interest rates and displace private investment. This economist is describing —
A) The spending multiplier B) An automatic stabilizer C) Crowding out D) The tax multiplier
Answer key & feedback (instructor)
| Q | Type | Answer | Feedback (the idea) |
|---|---|---|---|
| 1 | MC | B | Fiscal policy = Congress & the President (spending and taxes). All three other options are Fed tools = monetary policy, a different toolkit (Week 9+). |
| 2 | MC | B | Expansionary fiscal policy pushes the gas pedal — increase G and/or cut T — to push AD right and close a recessionary gap. |
| 3 | MC | C | 1/(1−0.8) = 1/0.2 = 5. (Near-miss distractors: 0.2 is 1−MPC itself, not the multiplier; 1.25 flips the fraction; 8 mistakenly treats MPC like a reserve ratio, 1/0.8 isn't right either.) |
| 4 | MC | D | ΔY = multiplier × ΔG = 5 × 20 = $100 billion — you must multiply the multiplier BY the spending change, not stop at the multiplier value (a classic near-miss is reporting $20 billion, the ΔG itself, as the answer). |
| 5 | TF | False | 1/(1−MPC) is the SPENDING (fiscal) multiplier; 1/RR is a completely different concept, the MONEY multiplier (bank reserves, Week 9). Same "1 over something" shape, different economics. |
| 6 | MC | A | Deficit = spending − revenue = 450 − 400 = $50 billion — a flow, measured per year. |
| 7 | MC | D | Debt is a stock: 1,000 + 50 = $1,050 billion — this year's deficit is ADDED to the existing balance, not substituted for it. |
| 8 | MA | A, C, D | Automatic stabilizers act WITHOUT new legislation (A); unemployment insurance (C) and falling tax revenue (D) both rise/fall automatically as incomes change. B describes discretionary policy; E is false — automatic stabilizers are a fiscal, not monetary, mechanism. |
| 9 | Match | as above | Distractor describes the DEBT (a stock), not the deficit (a flow) — the classic deficit-vs-debt mix-up. |
| 10 | MC | C | This is the classic crowding-out concern — government borrowing competing with private borrowers for loanable funds, raising interest rates and displacing some private investment. |
Quantitative gate: PASS — every numeric answer re-computed: Q3 1/(1−0.8) = 5; Q4 5×20 = 100; Q6 450−400 = 50; Q7 1,000+50 = 1,050.
Graph-logic check: PASS — every fiscal-policy directional claim verified against the NUMBERS_PACK canon: Q1/Q2 fiscal (Congress: G & T) correctly distinguished from monetary (the Fed) tools; Q2 expansionary = increase G / decrease T to fight a recessionary gap; Q5 spending multiplier 1/(1−MPC) correctly distinguished from the money multiplier 1/RR; Q6/Q7/Q9 deficit (flow) vs. debt (stock) correctly distinguished and correctly accumulated (1,000 + 50 = 1,050, not replaced).
Quality gate (self-checked): every single-answer item has exactly one correct option; distractors target the named traps (fiscal vs. monetary tools, wrong multiplier formula/near-miss arithmetic, stopping at the multiplier instead of multiplying by ΔG, deficit vs. debt, automatic vs. discretionary stabilizers). No free numeric entry; no essay. Includes ≥1 matching item (Q9), ≥1 multiple-answer item (Q8), ≥1 true/false item (Q5), and a fiscal-vs-monetary classification item (Q1).
F-quiz-week-07-qti.xml) ships inside the course's .imscc package — it lands in the Canvas gradebook on import.~ Prof. Ashford's edition · Fall 2026 · built with thecoursemaker.com