12.2 Review

What is the role of the Federal Reserve System in the United States economy?

• Controlling tax policies

• Enforcing labor laws

• Manipulating interest rate

• Regulating stock market

Which agency oversees the country’s stock market and ensures truthful corporate disclosures?

• Department of Labor

• Securities and Exchange Commission (SEC)

• Federal Reserve System

• Occupational Safety and Health Administration (OSHA)

What does the term 'inflation' refer to in the context of the economy?

• General increase in prices throughout the economy

• Absence of significant ups and downs in prices

• Total value of all goods and services produced in the United States each year

• General decrease in prices

When does a recession occur in the economy?

• When there is an absence of growth and the economy shrinks

• When the GDP is constantly growing

• When there are enough jobs for people who want them

• When the interest rate is manipulated by the Federal Reserve System

What is the primary goal of the Federal Government's fiscal policy?

• To achieve full employment, price stability, and economic growth

• To tax and spend money

• To ensure fairness in the market

• To regulate the money supply and availability of credit

How does an increase in government expenditures affect economic activity?

• It causes deflation in the economy

• It leads to greater economic activity

• It has no impact on economic activity

• It lessens economic activity

What is the reserve requirement in the context of the Federal Reserve System?

• The rate of interest a bank must pay when it borrows money from a Federal Reserve Bank

• The amount of money that the Fed requires banks to keep in reserve in their vaults or on deposit with one of the twelve Federal Reserve Banks

• The total value of all goods and services produced in the United States each year

• The cost borrowers incur and must repay in order to borrow money

How does the Fed's open market operations affect the money supply in the economy?

• It increases the money supply by buying government securities from banks

• It decreases the money supply by selling government securities to banks

• It has no impact on the money supply

• It leads to deflation in the economy

What is the discount rate in the context of the Federal Reserve System?

• The total value of all goods and services produced in the United States each year

• The rate of interest a bank must pay when it borrows money from a Federal Reserve Bank

• The amount of money that the Fed requires banks to keep in reserve in their vaults or on deposit with one of the twelve Federal Reserve Banks

• The cost borrowers incur and must repay in order to borrow money

How does a tax increase impact economic growth?

• It leads to greater economic growth

• It lessens economic growth

• It causes inflation in the economy

• It has no impact on economic growth