What this practice covers
These questions are drawn from past IB Economics papers and filtered to fiscal policy. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on fiscal policy, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Confusing fiscal policy (government, tax and spending) with monetary policy (central bank, interest rates).
- Counting transfer payments as part of G.
- Confusing the budget deficit (a flow) with national debt (a stock).
- Assuming a widening deficit proves policy has loosened, when the cause may be cyclical.
- Asserting crowding out will occur without considering spare capacity.
- Ignoring time lags, which are far longer for fiscal than for monetary policy.
- Forgetting that capital spending affects both AD and LRAS.
- (HL) Shifting AD by the initial injection rather than the multiplied amount.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Fiscal Policy revision notes.