Fiscal and Monetary Policy and Govt. Spending

What do banks do with most of the money that savers deposit?

• loan it to borrowers and charge interest.

• loan it as cash reserves in their vaults.

• send it to the Federal Reserve Bank for replacement.

• invest it in the stock market.

Under a gold standard, a country

• can issue unlimited amounts of currency.

• only issues money in the form of gold coins.

• has fixed the value of their currency to set amount of gold.

• Will often experience high inflation.

A student opens a saving account when he is young, saving money weekly, that will go into a college fund for when he graduates. He is using the savings account as a

• medium of exchange.

• store of value.

• unit of account.

• measure of development.

Money is a medium of exchange, meaning

• it allows people to have jobs.

• it tells us what things are worth compared to other items.

• it can be used to purchase goods and services.

• it can be used to save for purchasing goods at a later date.

If the Fed wishes to decrease money supply, then it should

• sell government securities on the open market.

• purchase government securities on the open market.

• lower the discount rate.

• lower the reserve requirement.

The Chairman of the Federal Reserve and member of the Board of Governors are appointed by

• Congress

• the President.

• the Secretary of the Treasury.

• Senate.

The Federal Reserve contracts the money supply and slows economic growth. It would pursue such a policy if it was trying to

• decrease unemployment.

• increase the GDP.

• fight inflation.

• raise taxes.

The government is concerned about an increase in unemployment and a drop in GDP. What would be an appropriate fiscal policy to respond to this event?

• Lower interest rates and decrease reserve requirements.

• Decrease government spending and increase tax rates.

• Increase government spending and decrease tax rates.

• Decrease the money supply.

Which of the following is NOT an expenditure of the FEDERAL government?

• Social Security

• National defense

• Medicare

• Higher education (colleges and universities)

Most of the money collected by the U.S. government is from

• individual income taxes.

• sales taxes.

• corporate taxes.

• tariffs and import fees.