Monetary Policy - Captain Fred
Quiz
•
Social Studies
•
10th Grade
•
Practice Problem
•
Easy
Joanne Beaver
Used 5+ times
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24 questions
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1.
MATCH QUESTION
1 min • 1 pt
How will the new wave of consumer spending affect each of the following items?
Increase in response to consumers
Consumer Spending and Confidence
Increase as prices go up
Inflation
Decrease because more jobs are created
Business Investment
Increase b/c consumers feel good
Unemployment
Answer explanation
As consumers spend more money, they will increase demand. This causes businesses to want to sell more items and they increase their spending. As they make more items, they need to hire more workers. This leads to higher prices and inflation.
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In response to the increasing inflation from consumer spending, how should the Fed respond?
Tighten the money supply
Nothing
Loosen the money supply
Answer explanation
The Fed wants to tighten or bring down the money supply when there is inflation.
3.
MATCH QUESTION
1 min • 1 pt
Based on the Fed's reaction to the rising consumer spending, what will happen?
Higher as Fed tightens money supply
Interest rates
Slows b/c of higher borrowing costs
Consumer spending
May rise b/c of slower Bus. Inv.
Business Investment (Bus. Inv.)
Slows b/c higher interest rates
Unemployment
Slows as Fed increases int rates
Inflation
Answer explanation
The Fed will work to increase interest rates in response to inflation. This causes the price to borrow money to go up since higher interest rates cause items to cost more. Both consumers and businesses are affected by the higher interest costs. This will slow business investment and help lead to higher unemployment.
4.
MATCH QUESTION
1 min • 1 pt
How will inflationary winds affect the following items?
Low b/c investment is high
Consumer spending and confidence
High
Unemployment
Spending is strong
Business Investment
Investment is strong
Inflation
Answer explanation
As consumers spend more money, they will increase demand. This causes businesses to want to sell more items and they increase their spending. As they make more items, they need to hire more workers. This leads to higher prices and inflation.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In response to the inflationary winds blowing prices higher, what should the Fed do?
Tighten money supply
Nothing
Loosen money supply
Answer explanation
The Fed wants to tighten or bring down the money supply when there is inflation.
6.
MATCH QUESTION
1 min • 1 pt
What impact will this Fed policy have on the following items?
Slows - interest rates increase costs
Interest Rates
Slows-interest rates make expansion rise
Consumer spending
May rise b/c of slower investment
Unemployment
Higher b/c of tighter monetary policy
Inflation
Slows b/c of slower spending
Business Investment
Answer explanation
The Fed will work to increase interest rates in response to inflation. This causes the price to borrow money to go up since higher interest rates cause items to cost more. Both consumers and businesses are affected by the higher interest costs. This will slow business investment and help lead to higher unemployment.
7.
MATCH QUESTION
1 min • 1 pt
Business Investments slow. What impact will this have on the following?
May begin to slow as spending slows
Unemployment
Slows
Consumer spending and confidence
Begins to slow as hiring slows
Inflation
Begins to rise as business slows
Business Investment
Answer explanation
Businesses lose confidence in sales and consumer spending. They will slow expanding their businesses. This causes work slowdowns and job layoffs leading to higher unemployment. Consumers lose confidence and slow their buying. Less demand leads to a fall in prices and inflation begins to fall.
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