Fiscal and Monetary Policy

Fiscal policy is actions taken by Congress and the President to stabilize the economy.

• True

• False

Monetary Policy is how the Federal Reserve influences the supply of money and brings the nation out of either a recession or inflationary period.

• True

• False

Match the tools to the correction stabilization policy.

Groups:

(a) Fiscal Policy

,

(b) Monetary Policy

• Discount Rate

• Interest on Reserves

• Government Spending

• Taxes

The government increases spending on public schools and healthcare to boost economic growth. Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy

The Federal Reserve (the central bank) lowers interest rates, making it cheaper for people and businesses to borrow money.Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy

To slow down high inflation, the Federal Reserve raises interest rates, making loans more expensive. Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy

To reduce high inflation, the government raises income taxes, leaving people with less money to spend. Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy

Unemployment is rising, so the government lowers corporate taxes to encourage businesses to hire more workers. Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy

The government is worried about rising debt, so it decides to cut spending on social programs. Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy

College tuition prices are rising, and many students rely on loans to pay for school. The Federal Reserve lowers interest rates, making student loans cheaper. Which type of policy is this?

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Expansionary Monetary Policy