Unit 3b Test Review (SSEMA3)

What is MOST LIKELY to happen to the economy if the Federal Reserve Bank increases the discount rate at the same time that Congress passes a law reducing government spending? 

• A  Uncertain, because the policies cancel each other.
•  B Expansion, because both of the policies are expansionary. 
• C Contraction, because both of the policies are contractionary. 
• D  Uncertain, because one is a fiscal policy and the other is a monetary policy.

Which policy combination would work BEST to slow down an overheating, overproducing economy?                        
               Fiscal                         Monetary
A          Decrease taxes     Sell Securities
B Increase Government spending  Lower the                                                               discount rate
C   Increase taxes                    Buy securities
 D.  Increase taxes            Raise the discount rate

• A
• B
• C
• D

  45. If the Federal Reserve lowers the reserve requirement, Bobby as a consumer, will More LIKELY  

• A. Buy a House 
• B. Save his Money 
•  C. Buy Bonds   
• D. Pay a high interest rate

The government is said to have a balanced budget if 

•  A. The value of imports is equal to the value of exports
•  B. Tax revenues are up from the previous year 
• C. Government spending exactly equals the amount of government revenue
• D. Both the House of Representatives and the Senate agree on the budget

   You hear another student say: “Fiscal policy is easy to understand, all you have to know is what is happening with current tax rates!”  This student is

• A  correct, that is the definition of fiscal policy.
• B  incorrect, he is describing monetary policy.
• C  partially correct; he needs to include government spending decisions as well.
•  D partially correct; he needs to include open market operations as well.

The way the government conducts spending and taxation is called?

• A. Monetary Policy 
• B. Economic Policy 
• C. Free-Enterprise policy 
• D. Fiscal Policy

Fiscal policy is concerned with which of the following?

•  A. Government spending and taxation 
• B. Consumer spending and productivity
•  C. Government spending and the money supply 
•  D. Taxation and inflation. 

A budget surplus means that  

• A  the Government has spent more money than it took in. 
• B  the Government has taken in more money than it spent.
• C  the Government has spent more money than the Fed. 
• D  the Fed has spent more money than the government.

National debt is different than government deficits in that

• A      the debt only includes money owed for the current fiscal year.
• B       deficits include all debts owed over time with interest.
• C      deficits only apply to monetary decisions made by Congress
• D      national debt is the sum of all past deficits plus interest

If Inflation rates are sharply increasing, which fiscal policy would make the Most sense? (SSEMA3.b) 

• A. reduce government spending 
• B. reduce income taxes 
• C. Reduce sale taxes 
• D. reduce the discount rate