SSEMA2-3 Fiscal Policy

Which of the following would cause the Federal Reserve to implement expansionary monetary policy?

• The economy is expanding too quickly and inflation is a concern.
• The federal government passes a new budget with a large deficit.
• The economy is prosperous with low inflation.
• A recession has reduced aggregate demand and increased unemployment.

What would be the result of lowering interest rates on bank reserves held at the Federal Reserve?

• Money Supply increases
  Aggregate Demand increases
• Money supply increases
  Aggregate demand decreases
• Money supply decreases;
  Aggregate demand increases
• Money supply decreases; Aggregate demand decreases

Franklin D. Roosevelt's New Deal would be an example of

• expansionary fiscal policy
• contractionary fiscal policy
• expansionary monetary policy
• contractionary monetary policy

When interest rates rise, the number of loans made by banks will

• increase
• decrease
• be unaffected

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

• cause interest rates to decrease because low interest rates encourage business growth and expansion 
• cause interest rates to rise because high interest rates encourage business growth and expansion 
• increase the discount rate it charges banks, which would increase the money supply 
• increase consumer spending by reducing the money supply 

Which statement BEST describes the U S government’s monetary policy and fiscal policy? 

• Monetary policy reflects the Federal Reserve’s authority to change the money supply; fiscal policy reflects the government’s power to influence the economy through taxes, expenditures, and borrowing. 
• Monetary policy reflects the Federal Reserve’s authority to change tax rates; fiscal policy reflects the government’s power to influence the money supply by lowering the discount rate for loans to banks. 
• Monetary policy refers to the Federal Reserve’s influence in the economy through borrowing and creating a deficit; fiscal policy refers to the government’s authority to increase spending. 
• Monetary policy refers to the Federal Reserve’s authority to increase spending; fiscal policy refers to the government’s authority to increase the discount rate for loans to banks. 

How are fiscal and monetary policies similar?

• They both use the same tools to fix economic problems
• They both try to promote economic stability.
• They always must have Congressional approval before passing.
• They both are decided by a Board of Governors.

If the economy is in a recession, the Federal Reserve could do all of the following EXCEPT

• Lower taxes
• Lower the discount rate
• Buy securities
• Lower the required reserve ratio

Taxing & spending to help the economy grow is referred to as

• expansionary policy
• monetary policy
• contractionary policy
• budget deficit

Taxing & spending to slow the economy is referred to as 

• budget surplus 
• monetary policy
• contractionary policy
• budget deficit