Unit 4 Review - Economic Policy

Which is NOT a result of growing federal debt?

• Reduced national savings

• Increased government borrowing costs

• Increased economic stability

• Limited ability to respond to unforeseen events

How does the Central Bank maintain economic stability?

• By controlling all financial transactions

• Through monetary and fiscal policies

• By removing banking regulations

• Through government oversight

Why might the government raise taxes?

• To become unpopular

• To lower the deficit or fund programs

• To eliminate services

• To reduce income

What is the purpose of stimulus checks?

• Reduce national debt

• Provide economic relief and encourage spending

• Increase government jobs

• Remove tax requirements

What is purchasing power?

• Amount of goods/services a currency can buy

• Individual salary potential

• Future investment opportunities

How is the Consumer Price Index (CPI) calculated?

• Guessing price changes

• Surveying wealthy neighborhoods

• Collecting price data nationwide

• Asking government employees

How do interest rates affect borrowing and spending?

• Low interest rates discourage borrowing

• High interest rates encourage more spending

• Low interest rates encourage borrowing and spending

• Interest rates have no impact on economic behavior

Who determines discretionary spending?

• The President

• State governors

• Congress annually

• Federal Reserve

"Cooling" the economy typically involves:

• Increasing government spending

• Lowering taxes

• Raising taxes or decreasing spending

• Issuing stimulus checks

What is the main goal of fiscal policy?

• Increase national debt

• Manage the economy through taxes and spending

• Eliminate government jobs

• Create more bonds