Fiscal and Monetary Policy

Who makes decisions about fiscal policy?

• The President and Congress

• The Federal Reserve

• The Supreme Court

• The public

Who makes decisions about monetary policy?

• The President and Congress

• The Federal Reserve

• The Supreme Court

• The public

The economy is in a recession/deflationary period. What kind of policy should be enacted?

• Expansionary

• Contractionary

What would be an example of expansionary fiscal policy?

• Raise taxes

• Increase government spending

• Buy bonds

• Increase the discount rate

The economy is in a strong recovery/inflationary period. What kind of policy should be enacted?

• Expansionary

• Contractionary

Select ALL the examples of contractionary monetary policy.

• Increase the discount rate

• Sell bonds/government securities

• Increase the required reserve ratio

• Lower taxes

The discount rate can be described as

• The interest rate charged by the Fed when banks take out a loan from them

• A period when interest rates to the public are temporarily discounted

• When goods and services are cheaper, to increase the circulation of money

• A secret bribe that a government official might pay to the Fed under the table

The required reserve ratio can be described as

• The percentage of money that banks must hold instead of loaning out

• A special mortgage rate

• The rules dictating portfolio diversification

• The 50/30/20 rule