AP Macroeconomics Unit 5

Front

If Congress increases government spending by the same amount it increases taxes, aggregate demand will

Back

increase

Front

Money loses its value when it: It becomes too plentiful, becomes too portable, is divisible, is durable

Back

becomes too plentiful

Front

If the Federal Reserve raises interest rates to combat rapid inflation, what might be a negative outcome? Options: Unemployment rates would rise, taxes will rise, The government would put a freeze on prices, international trade would stop

Back

Unemployment rates would rise

Front

Which of the following is a monetary policy action used to combat a recession? Options: cutting taxes, increasing the money supply, decreasing the money supply, raising taxes

Back

increasing the money supply

Front

The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT: decreasing the discount rate., increasing the reserve requirement., selling securities on the open market., making banks hold a reserve for all types of deposits.

Back

decreasing the discount rate.

Front

If the Federal Reserve System wanted to stimulate the U.S. economy and reduce unemployment, it would:

Back

cause interest rates to decrease because low interest rates encourage business growth and expansion.

Front

If the Federal reserve and Government are attempting to encourage growth and stimulate the economy, which actions would each take? (monetary / fiscal)

Back

decrease the interest rate / increase government spending

Front

If the federal government is attempting to encourage spending by consumers and businesses, a fiscal policy BEST serving this purpose would be:

Back

decreasing taxes.

Front

The rate the Fed charges banks for a loan

Back

Discount rate

Front

Which of the following statements is true?
Options:
Contractionary monetary policy would increase government revenue & slow down the economy.
Contractionary fiscal policy would decrease the reserve requirement & slow down the economy.
Contractionary fiscal policy would lead to a decrease in national debt.
Contractionary monetary policy leads to a budget deficit.

Back

Contractionary fiscal policy would lead to a decrease in national debt.