Econ 102 Exam Policies

The central bank conducts countercyclical _______ policies by manipulating _______.

• monetary; interest rates and government budgets

• monetary; interest rates and bank reserves

• fiscal; interest rates and bank reserves

• fiscal; interest rates and inflation rates

A countercyclical fiscal policy is conducted by _______ by acting to change _______.

• the government; taxes and government expenditures

• the central bank; interest rates and taxes

• the government; taxes and interest rates

• the government; government expenditures and interest rates

The economy is in a recession. The Fed could take direct action to stimulate economic activity by _______.

• lowering short-term interest rates

• increasing reserve ratios

• increasing short-term interest rates

• increasing long-term interest rates

If the Fed wants to stimulate an economy, it will _______.

• sell Treasury bonds

• lower short-term interest rates

• increase the quantity of required reserves

• reduce money supply

Expansionary fiscal policy uses _______ government spending and _______ taxes to increase aggregate economic activity.

• higher; higher

• higher; lower

• lower; higher

• lower; lower

Contractionary fiscal policy uses _______ government spending and _______ taxes to decrease aggregate economic activity.

• higher government spending and higher taxes

• higher government spending and lower taxes

• lower government spending and higher taxes

• lower government spending and lower taxes

Which of the following is an example of an automatic stabilizer during a recession?

• A decrease in tax revenue due to an increase in unemployment

• A decrease in inflation due to an increase in consumption

• An increase in interest rates due to a decrease in investment

• An increase in money supply due to a decrease in bank deposits

Which of the following is an example of discretionary fiscal policy during a recession?

• An increase in tax rates to increase revenue

• A decrease in transfer payments to unemployed workers

• A temporary tax cut to boost consumption

• A decrease in money supply to lower the federal funds rate

Refer to the scenario above. Mark's opportunity cost of making a table is _______.

• 0.33 of a chair

• 1 chair

• 3 chairs

• 3.33 chairs

Refer to the scenario above. Mark's opportunity cost of making a chair is _______.

• 0.33 of a table

• 1 table

• 3 tables

• 3.33 tables