Unit 6: Monetary and Fiscal Policy

If the Federal Reserve raises interest rates to combat rapid inflation, what might be a negative outcome?

• Unemployment rates would rise
• taxes will rise 
• The government would put a freeze on prices
• international trade would stop 

Which of the following is a monetary policy action used to combat a recession?

• increasing the reserve requirement

• increasing the money supply

• decreasing the money supply

• increasing interest rates

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.

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

• increase the reserve requirement / increase government spending
• sell government securities / decrease taxes
• decrease the discount rate / increase government spending
• buy government securities / decrease government spending

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

• A. lower interest rates because low interest rates encourage businessgrowth and expansion
• B. raise interest rates to encourage business growth and expansion
• C. increase the discount rate which would increase the money supply
• D. increase consumer spending by reducing the money supply

The rate the Fed charges banks for a loan

• Discount rate
• Federal fund rate
• reserve ratio
• prime rate

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

• decreasing taxes.
• decreasing government spending.
• reducing the budget deficit
• increasing taxes

The expansion or contraction of the money supply in order to influence the cost and the availability of credit is 

• Monetary Policy
• Fiscal Policy
• Contractionary Policy
• Expansionary Policy

The use of taxes and government spending to affect the economy

• Monetary Policy
• Fiscal Policy
• Contractionary Policy
• Expansionary Policy

How many districts are in the Federal Reserve System?

• 10

• 12

• 24

• 15