Fiscal & Monetary Policy Practice

Fiscal Policy is controlled by...

• The Government

• The Federal Reserve System

• The states

• The Department of Commerce

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

Taxing & spending to help the economy grow is referred to as

• expansionary policy
• monetary policy
• contractionary policy
• budget deficit

Taxing & spending to slow the economy is referred to as 

• budget surplus 
• monetary policy
• contractionary policy
• budget deficit

During a economic expansion, the Federal Government should use...

• an expansionary fiscal policy

• a contractionary fiscal policy

During a contraction / recession, the Federal Government should use

• an expansionary fiscal policy

• a contractionary fiscal policy

An example of expansionary fiscal policy would be

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

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.

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

The Federal government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies  might be enacted to reduce inflation?

• Increasing taxation
• Open market sales
• decreasing taxation
• Increasing government spending