Unit 7: Government & The Economy Study Guide

The Federal Reserve Banks (FED) have a number of tools at their disposal to control swings in the U.S. economy.

Select the reason why the Federal Reserve would take the following action.

The Fed uses its monetary tools to increase the money supply in the U.S. economy.

• Fear the economy is falling into a recession

• Fear the economy is growing too rapidly

The Federal Reserve Banks (FED) have a number of tools at their disposal to control swings in the U.S. economy.

Select the reason why the Federal Reserve would take the following action.

The Fed announces that, effective immediately, it will be lowering the discount rate to member banks.

• Fear the economy is falling into a recession

• Fear the economy is growing too rapidly

The Federal Reserve Banks (FED) have a number of tools at their disposal to control swings in the U.S. economy.

Select the reason why the Federal Reserve would take the following action.

The Fed issues an order that raises the federal reserve requirement on the nation’s member banks.

• Fear the economy is falling into a recession

• Fear the economy is growing too rapidly

The Federal Reserve Banks (FED) have a number of tools at their disposal to control swings in the U.S. economy.

Select the reason why the Federal Reserve would take the following action.

The Fed’s Open Market Committee begins to sell millions of dollars of U.S. Treasury Bills to private brokers.

• Fear the economy is falling into a recession

• Fear the economy is growing too rapidly

What might motivate Congress to increase taxes and decrease government spending?

• rising unemployment rates

• increasing consumer spending

• falling level of demand by customers

• declining corporate spending

The Federal Reserve does many things to depress or foster spending by consumers and businesses.

Identify the appropriate monetary policy of the Fed in the scenario being described below.

Scenario: The U.S. economy is growing too rapidly, and the Fed wishes to decrease the money supply in the economy.

• The Fed would decrease the reserve requirement

• The Fed would increase the discount rate for banks

• The Open Market Committee buys government bonds

The Federal Reserve does many things to depress or foster spending by consumers and businesses.

Identify the appropriate monetary policy of the Fed in the scenario being described below.

SELECT ALL THAT APPLY

Scenario: The U.S. economy is growing too rapidly, and the Fed wishes to decrease the money supply in the economy.

• The Fed would increase the reserve requirement

• The Fed would decrease the discount rate for banks

• The Open Market Committee sells government bonds

What would be the best title to describe the situation shown in the diagram?

• A description of economic depression

• A description of inflation

• Why discretionary spending occurs

• aggregate demand

In times of economic recession, the Federal Reserve Board often tries to encourage economic growth by

• decreasing the money supply

• ending unemployment benefits

• raising taxes on all money earnings

• lowering interest rates

The federal government uses its fiscal policy power to stimulate or slow down the American economy.

Identify the fiscal policy needed by the federal government in the following description.

The U.S. economy faces an economic depression as businesses close and unemployment rates begin to rise.

• Stimulate the Economy

• Slow Down the Economy