Government and the Economy Review

What is one of the federal reserve's primary functions in the United States economy?

• Collecting federal income taxes

• Applying import and export tariffs

• Maintaining stock market stability

• Regulating the nation’s money supply

What is one way the Federal Reserve System regulates economic activity?

• Regulating tariff rates on foreign imports

• Regulating production on consumer goods

• Regulating the amount of money in circulation

• Regulating spending by the federal government

The government enacted a law requiring the installation of seat belts in new cars. What is the intended benefit of this type of government regulation?

• To increase tax revenue

• To promote economic growth

• To reduce private sector profits

• To enhance consumer safety

Fill in the blank. The Federal government uses fiscal policies to maintain economic stability, including making changes to taxes and government spending. The government can try to stimulate economic growth by ______________ or _______________.

• Increase government spending, increase taxes

• Increase government spending, decrease taxes

• Decrease government spending, increase taxes

• Decrease government spending, decrease taxes

Why is it difficult for the federal government to make large cuts to spending?

• Most of the government costs are for wages for federal employees

• The largest part of the government spending is fixed and can’t be reduced

• Most people people oppose cuts for many programs

• A constitutional amendment has limited the size of any spending cuts that can be passed by congress during one fiscal year

The government decides to begin a massive effort to rebuild the nation’s highway

• Tax Policy

• Spending Policy

The government increases deductions for households with students attending college

• Tax Policy

• Spending Policy

The government has extended unemployment benefits for qualified workers for an additional six weeks

• Tax Policy

• Spending Policy

The Government has increased revenues by charging extra fees for consumption of gasoline

• Tax Policy

• Spending Policy

The Federal Reserve purchases and sells government securities, adjusts the discount rate to produce certain economic outcomes. What is one outcome the Federal Reserve might want to produce when purchasing government securities?

• Increasing interest rates

• Reducing money supply

• Fostering economic expansion

• Fostering economic contraction