Economic Policy Quiz

1. Deflation leads to high levels of unemployment and bankruptcies.
2. Demand-pull inflation can be caused by factors such as lower taxes, government spending, and growing consumer confidence.
3. Governments can use contractionary fiscal and monetary policies to decrease aggregate demand and cure inflation.
4. Investing in infrastructure and providing incentives for firms to invest can help stabilize the economy.
5. Fiscal policy can target certain sectors of the economy and is highly effective in a recession.
6. Weaknesses of fiscal policy include political influence and the possibility of "crowding out" private investment.
7. The role of a central bank includes regulating commercial banks and determining interest rates.
8. Strengths of monetary policy include independence of the central bank and the ability to adjust interest rates incrementally.
9. Weaknesses of monetary policy include interest inelastic consumption/investment and conflicting government objectives.
10. In a recession, firms and consumers may simply repay debts instead of borrowing, limiting the effectiveness of monetary policy.

Test your knowledge on macroeconomic policies and their impact on the economy with this quiz. From deflation and demand-pull inflation to fiscal and monetary policies, this quiz covers key concepts and their strengths and weaknesses. Whether you're a student studying economics or just interested in understanding the economy, this quiz is a great way to learn more about macroeconomic policies and their effects on society.