Introduction to Economic Policy

What are the three economic goals that policymakers aim to achieve?

• Full employment, economic growth, and price stability

• High taxes, low inflation, and budget surplus

• Increased exports, reduced imports, and balanced budget

• Maximum employment, stable prices, and moderate interest rates

What is fiscal policy?

• The process of setting interest rates by commercial banks

• The regulation of stock markets by the government

• The government's use of spending and taxing to influence the economy

• The Federal Reserve's use of interest rates to control the economy

What happens when the government spends more than it collects in taxes?

• The economy experiences deflation

• There is a budget deficit

• The national debt decreases

• There is a budget surplus

What is the effect of lower taxes on consumer spending?

• Inflation decreases

• Consumers have less money to spend

• Consumers have more money to spend

• Government revenue increases

What is the role of the Federal Reserve System?

• To set tax rates for the government

• To use monetary policy to support the economy

• To regulate international trade

• To manage the federal budget

What is the impact of increasing the money supply?

• It promotes inflation

• It decreases inflation

• It contracts the economy

• It reduces employment

What is the purpose of contractionary monetary and fiscal policies?

• To reduce the national debt

• To slow inflation

• To stimulate employment and GDP growth

• To increase government spending