48 Monetary & Fiscal Policy

The ______ was created in 1913 to serve as America's central bank.

• Federal Reserve System

• First Citizens Bank

• Executive Branch

The Federal Reserve also sets the ______ banks charge to lend money to each other, which again controls the amount of money that circulates.

• interest rates

• minimum wage

• salary ceiling

There's ...one... important way that the Fed influences the money supply in the U.S. ... [it] buys and sells government debt in the form of treasury bills, or ______.

• government bonds

• promissory notes

• insurance loans

___________ is a general rise in prices that can be caused by... the amount of money that circulates. (too much causing rise in prices)

• inflation

• capital profit

• recession

Usually low interest rates tend to cause inflation and reduce ____________, and high interest rates are expected to cool down an overheating economy.

• unemployment

• government spending

• purchasing

The government can spend more money on programs than it takes in taxes ... [but can try to fix it] by borrowing it, which the government does by ... _______.

• selling bonds

• providing loans

• charging interest

The two big-ticket mandatory spending items. These are social security and Medicare, and they are paid for with dedicated __________.

• federal taxes

• government loans

• private securities

_______________ provide income and health insurance for elderly people

• Social Security and Medicare

• Federal Pension and Unemployment

• Independent Health Care and Life Insurance

By far the largest chunk of government spending goes into_________

• Defense

• Education

• Research