Monetary & Fiscal Policy

An example of an automatic stabilizer that works when the economy contracts is:

• a rise in tax receipts.

• a fall in government purchases.

• a discretionary decrease in government purchases.

• a rise in government transfers, as more people receive unemployment insurance benefits.

Contractionary fiscal policy includes:

• decreasing taxes.

• increasing taxes.

• increasing the money supply.

• increasing government expenditures.

Which of the following is an expansionary fiscal policy?

• an increase in the money supply which decreases interest rates

• an increase in taxes which reduces the budget deficit and decreases consumption

• a decrease in government spending on the space program

• an increase in unemployment benefits

The president of the United States appoints members of which group on the Federal Reserve organization chart?

• Federal Open Market Committee

• Board of Governors

• Federal Advisory Council

• Federal Reserve Banks

The discount rate is the interest rate the Fed charges on loans to:

• consumers.

• the federal government.

• state governments.

• banks.

When we keep part of our wealth in a savings account, money is playing the role of:

• medium of exchange.

• unit of account.

• barter.

• store of value.

Which of the following is a monetary policy that might be used to expand the economy?

• raise the reserve requirement

• increase spending

• decrease the discount rate

• sell treasury bonds

Fiscal policy that decreases aggregate demand is:

• balanced.

• supplemental.

• contractionary.

• expansionary.

If the Fed conducts an open-market purchase and buys bonds:

• the money supply decreases and interest rates decrease.

• the money supply increases and interest rates decrease.

• the money supply increases and interest rates increase.

• the money supply decreases and interest rates increase.

Which letter designations in the table mark Fed actions that will contract the money supply?

• F, I, K

• F, H, J

• G, H, J

• G, I, J