Business Cycle and Economic Policy

Liberalization implies

• reduction in government's control over economy

• encouragement to public sector

• nationalisation

• none of these

laissez- faire policy is that in which

• there is no intervention by the government in the functioning of an economy

• there is intervention by the state in the functioning of an economy

• there is no intervention by the state in the functioning of an economy

• none of these

The federal government's overall approach to spending and taxes is called

• Physical Policy

• Fiscal Policy

• Government Policy

• Monetary Policy

What are the tools of fiscal policy the government uses...(choose 2)

• government spending

• taxes/transfers

• inflation

• interest rates

Match the following

• Fiscal Policy (effect)

• Fast because action takes place immediately

• Monetary Policy (effect)

• Relatively small because there is a limit to the amount interest rates can be cut

• Fiscal Policy (time)

• Slow because it takes time to decide on and implement

• Monetary Policy (time)

• Large because the relief can be measured in trillions of dollars

What term is used to describe an increase in the general price level?

• Deflation

• Monetary policy

• Stagnation

• Inflation

"The Fed" refers to the....

• Federal Bureau of Investigation

• Federal Government

• Federal Reserve System

• Federal Income Tax

The Federal Reserve uses ______ to regulate the economy.

• Monetary Policy

• Fiscal Policy

Too much money in our economy leads to ...

• Inflation

• Recession

If the economy is in a severe recession, which of the following policy actions is most appropriate?

• (A) Keeping the money supply constant and reducing the budget deficit

• (B) Decreasing government spending and taxes by the same amount

• (C) Increasing both the money supply and government spending

• (D) Increasing both the federal funds rate and taxes

• (E) Decreasing the money supply and increasing taxes