Federal Reserve Review Questions

What is one way the Federal Reserve System regulates economic activity?

• regulating tariff rates on foreign imports.

• regulating production of consumer goods

• regulating the amount of money in circulation

• regulating spending by the federal government

What is one of the Federal Reserve’s primary functions in the United States economy?

• collecting federal income taxes

• applying import and export tariffs

• maintaining stock market stability

• regulating the nation’s money supply

Why might lawmakers increase taxes and decrease government spending?

• to reduce unemployment

• to increase consumer spending

• to decrease the level of demand

• to encourage corporate spending

Under an EXPANSIONARY fiscal policy, government spending is:

• Increased

• Decreased

Under an EXPANSIONARY fiscal policy, taxes are:

• Increased

• Decreased

Under a CONTRACTIONARY fiscal policy, government spending is:

• Increased

• Decreased

Under a CONTRACTIONARY fiscal policy, taxes are;

• Increased

• Decreased

In the United States, the government uses expansionary and contractionary fiscal policies to affect conditions in the economy. Identify which fiscal policy would be best suited for each situation:

Situation: End a recession

• Expansionary

• Contractionary

In the United States, the government uses expansionary and contractionary fiscal policies to affect conditions in the economy. Identify which fiscal policy would be best suited for each situation:

Situation: Increase tax revenue.

• Expansionary

• Contractionary

In the United States, the government uses expansionary and contractionary fiscal policies to affect conditions in the economy. Identify which fiscal policy would be best suited for each situation:

Situation: Lower inflation

• Expansionary

• Contractionary