Unit 6 & 7 Review

The two "tools" of Fiscal Policy are:

• the power to tax

• the power to spend

• the power to borrow money

• the power to print money

An example of expansionary fiscal policy would be

• cutting taxes.
• cutting government spending.
• cutting production of consumer goods.
• cutting prices of consumer goods.

If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?

• Selling securities on the open market
• Raising interest rates
• Reducing government spending
• Raising reserve requirements

If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is 

• decreasing taxes.
• decreasing spending.
• decreasing the money supply.
• decreasing the reserve requirement.

Which of the following is an example of expansionary policy?

• The Fed sells bonds
• the Fed raises reserve requirements
• the Fed buys bonds
• the Fed raises the Fed funds rate

An example of a contractionary fiscal policy would be if:

• taxes were cut
• the government bailed out GM 
• the Fed decrease the fed funds rate
• taxes were increased

If Congress increases government spending by the same amount it increases taxes aggregate demand will

• remain the same
• decrease, these are both contractionary
• increase
• shift down

Money loses its value when it

• It becomes too plentiful
• becomes too portabale
• is divisible
• is durable

Which of the following is a monetary policy action used to combat a recession?

• cutting taxes
• increasing the money supply
• decreasing the money supply
• raising taxes

The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT

• decreasing the discount rate.
• increasing the reserve requirement.
• selling securities on the open market.
• making banks hold a reserve for all types of deposits.