Fiscal and Monetary Policy

What is Fiscal Policy?

• Actions taken by the government to affect the business cycle

• Actions taken by the federal reserve to affect the business cycle

• Actions taken by the president to affect the business cycle

• Actions voted on by the people every 4 years to affectt he business cycle

What is Monetary Policy?

• Actions taken by the government to affect the business cycle

• Actions taken by the federal reserve to affect the business cycle

• Actions taken by the president to affect the business cycle

• Actions voted on by the people every 4 years to affectt he business cycle

Which of the following is not a Fiscal Policy action?

• Increasing Taxes

• Decreasing Taxes

• The Federal Reserve Selling Bonds

• Increasing Government Spending

Which of the following is not a Monetary Policy action?

• Selling Bonds

• Required Reserves for Banks

• The Federal Reserve Buying Bonds

• Decreasing Taxes

If the economy is experiencing high inflation which combination below would work best to decrease inflation?

• Increase Taxes, Decrease Government Spending

• The Federal Reserve Buying Bonds, The Federal Reserve Selling Bonds

• Increase Bank Required Reserves, The Federal Reserve Buying Bonds

• Decrease Taxes, Decrease Government Spending

If an economy is experiencing a recession, which action below would work best to get GDP to expand/increase again?

• Increase Taxes

• The Federal Reserve Buying Bonds

• Lower Bank Required Reserves

• Decrease the Discount Rate

How much control does the President of the US have over the economy?

• Almost none

• As much as he/she wants

• A lot during election years only

• A lot every year of their presidency

If the government simultaneously increases taxes and decreases spending, what phase of the business cycle is likely next?

• Expansion

• Recession

• Peak

• Trough

When the Federal Reserve buys bonds on the open market what is the result?

• The economy expands because more cash circulates/ money supply increases

• The economy goes into a recession because less cash circulates

• There is zero net effect on the economy because the money supply remains unchanged

• The result not measureable because there are too many factors

If the Federal Reserve was to increase the Required Reserve Ratio for banks, what would the result be on the economy?

• Economic growth would slow or maybe go into recession due to less loanable funds

• Economic growth would expand/increase due to an increase in loanable funds

• There is zero net effect on the economy because the money is still in the bank

• Inflation would be out of control because of the huge increase in the money supply