Ch 15/16 Quiz: Fiscal Policy and Monetary Policy

If government is increasing spending and decreasing taxes, what type of policy is it conducting?

• Expansionary monetary policy

• Contractionary monetary policy

• Contractionary fiscal policy

• Expansionary fiscal policy

Which of the following best defines inflation?

• The rapid increase in the price of a specific good, such as gasoline

• A general, sustained upward movement of prices for goods and services in an economy

• The fluctuation in revenue and expenditures caused by Congress and the president

• An increase in the national debt caused by ongoing deficit spending

Congress might lower taxes if the economy appears to be in

• a period of expansion.

• a recessionary period.

•  a period of increased employment.

• a period of increasing GDP.

Which of the following is a significant decline in general economic activity over an extended period that includes declining real income and rising unemployment?

• business cycle

• recession

• inflation

• deficit

Which of the following is true of active fiscal policy actions?

• Policymakers can pinpoint the economic outcomes of their policies.

• The political process makes it easy to pass needed actions in times of economic crisis.

• Economic conditions will stay the same without policymaker action.

• It is often difficult for policymakers to know whether policies had any impact on the economy.

Would this example illustrate a budget deficit, budget surplus, or national debt?

In one year, the revenue of the United States equaled 7.6 trillion and the spending (outlays) equaled 7.9 trillion.

• budget deficit

• budget surplus

• national debt

• none of the above

True or False?

A federal deficit differs from national debt because a federal deficit is the accumulation of all debt.

• True

• False

Who controls monetary policy?

• The government

• The Federal Reserve Bank

• Congress

• The President

What are the main tools are associated with monetary policy? HINT: There is more than one answer.

• spending/budget

• tax rates

• interest rates

• money supply

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