Unit 4 Monetary Policy

Which of the following is NOT a goal for

government spending and fiscal policy?

• create a budget deficit

• reduce unemployment

• increase employment opportunities

• increase aggregate demand

Which of the following are elements of an

expansionary fiscal policy?

• increase taxes, increase gov't spending

• decrease taxes, decrease gov't spending

• decrease taxes, increase gov't spending

• increased taxes, decrease gov't spending

What is the reserve requirement?

• The amount of money banks owe the government

• The amount of money banks have to hold

• The amount of money banks can borrow

• The amount of money banks can invest

Which of the following is responsible for fiscal policy?

• the Federal Bureau of Investigation

• the Federal Reserve

• Congress & the President

• the Federal Reserve banks

Which of the following are fiscal policy tools (select 2)?

• adjusting the reserve requirement

• adjusting the discount rate

• changing government spending

• changing income taxes

• buying/selling bonds via open market operations

Which monetary policy tool would be expansionary?

• decrease reserve requirement to increse the money supply

• increase discount rate to decrease the money supply

• increase interest paid on reserves to decrease the money supply

• selling bonds via open market operations to decrease the money supply

Economy is in a recession. What should Fed do to increase the money $$$ supply?

• decrease reserve requirement

• decrease the discount rate

• Open Market Committee buy bonds

• all of these

If economy grows too rapidly, what is best option for the Fed consider for stabilizing economy?

• increase reserve requirement

• increase discount rate

• sell U.S. Treasury Bonds

• all of these

Match the correct policy tools.

• Contractionary Fiscal Policy

• Decrease the discount rate

• Expansionary Monetary Policy

• Increase Government Spending

• Expansionary Fiscal Policy

• Increase Income Taxes

• Expansionary Monetary Policy

• Sell Government Bonds (securities)

the amount of money a bank must keep and not invest or loan out

• discount amount

• prime requirement

• actual amount

• reserve requirement