Topic 9: Fiscal and Monetary Policy

Under what circumstances might the government use contractionary fiscal policy?

• when it is trying to increase government revenue

• when it is trying to increase government spending

• when it is trying to fight inflation

• when it is trying to end a recession

Which of the following would be an appropriate caption for this political cartoon about the use of economic stimulus plans, or expansionary fiscal policy?

• Stimulus plans are a risky gamble.

• Stimulus plans are risky but rewarding.

• Stimulus plans are likely to pay off well.

• Stimulus plans are less effective than contractionary policies.

The federal budget is the instrument by which the government implements

• central planning of the economy.

• fiscal policy.

• monetary policy.

• free market ideals.

In the United States, fiscal policy is made by

• executive order from the President.

• a process involving different branches of government.

• central planners working for Congress.

• the actions of consumers and producers in the market.

"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible."

—Milton Friedman

This quote might BEST be associated with which of the following?

• supply-side economics

• Keynesian economics

• classical economics

• traditional economics

This photo announces a government program that is attempting to

• encourage free market competition.

• stimulate economic growth.

• combat surging inflation.

• implement supply-side economics.

This political cartoon criticizes the New Deal for being

• corrupt.

• too small.

• wasteful.

• socialist.

"It is not my intention to do away with government. It is rather to make it work—work with us, not over us; stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it."

—President Ronald Reagan, Inaugural Address, January 20, 1981

Based on this quote, you could assume that Reagan favored

• reduced government intervention in the economy.

• no government intervention in the economy.

• increased government intervention in the economy.

• the transition to a command economy.

Which of the following conclusions can you safely draw from this graph?

• High taxes have caused serious damage to the U.S. economy.

• Tax rates for high-income Americans have changed significantly over history.

• Experience has made clear the best rate of taxation.

• Income tax rates must go up in order to achieve growth.

This photograph shows women working to help construct military planes in 1942. This photograph illustrates Keynesian fiscal policy because it shows

• that a laissez-faire approach to the economy never works.

• that wars can have a devastating effect on the economy.

• the failure of New Deal policies for boosting employment.

• workers employed as a result of government spending.