Fiscal & Monetary Policy Test

Which of the following would most likely slow down the economy during a period of intense business activity & rapidly rising prices?

• An increase in the money supply

• An increase in government spending

• A reduction in taxes

• A reduction in the money supply

Monetary policy differs from fiscal policy in that monetary policy is

• More sensitive to political considerations

• Under the control of the federal reserve system

• More time-consuming to implement

• Related to tax increases & decreases

Which of the following is a fiscal tool for stabilizing the economy?

• Raising or lowering reserve requirements

• Open-market operations

• Increasing or decreasing government spending

• Changing the discount rate

Which policy would tend to stimulate (expand) the economy?

• The FED buys securities in the open market

• Congress increases tax rates

• Congress reduces federal spending programs

• The FED raises the reserve ratio

Which policy would tend to slow (contract) the economy?

• The FED raises the discount rate

• Congress raises the debt ceiling

• Congress appropriates an additional $50billion for defense

• The FED reduces the reserve ratio

Fiscal Policy refers to the power of the federal government to?

• Tax & spend

• Print money

• Control credit

• Regulate interstate commerce

Which of the following affects the amount of money in circulation (money supply)?

• Changes in the discount rate

• Open-market operations

• Changes in the reserve requirement

• All of the above

If the Federal Reserve System's Open Market Committee bought additional government securities (buy bonds), the most immediate effect could be to?

• Decrease real GDP

• Increase per capita GDP

• Increase the money supply

• Decrease the total money supply

When the FED raises the discount rate, its primary purpose is to?

• Decrease the loan rates of commercial banks

• Reduce interest rates

• Increase economic growth

• Reduce the money supply

During a period of inflation, the President & Congress most likely would

• Raise taxes & increase government spending

• Raise taxes & reduce government spending

• Raise the prime interest rate & increase government spending

• Lower the prime rate & reduce government spending