Exploring Monetary and Fiscal Policy Dynamics

What is the primary goal of both monetary and fiscal policy?

• To manage natural resources

• To influence aggregate demand

• To regulate international trade

• To control population growth

Who is responsible for implementing monetary policy in the United States?

• The Treasury Department

• The Federal Reserve

• The President

• The Congress

What does the Federal Reserve do to implement monetary policy?

• Adjusts tax rates

• Prints and manages the supply of money

• Modifies employment laws

• Changes government spending

What is the effect of monetary policy on the supply of money?

• It decreases the supply of money

• It increases the supply of money

• It has no effect on the supply of money

• It only affects the demand for money

How does increasing the money supply affect interest rates?

• Has no effect on interest rates

• Decreases interest rates

• Only affects foreign interest rates

• Increases interest rates

How does the government finance its spending?

• By printing more money

• Through donations

• By selling government assets

• Through tax revenue and borrowing

What happens when the government increases its spending?

• Aggregate demand decreases

• The money supply decreases

• Aggregate demand increases

• Interest rates rise

What is the primary tool of fiscal policy?

• Regulating stock markets

• Controlling exchange rates

• Government spending and taxation

• Changing interest rates

Which of the following is a consequence of fiscal policy?

• Setting minimum wage levels

• Changing the federal funds rate

• Directly affecting aggregate demand through spending

• Regulating the stock exchange

What role do taxes play in fiscal policy?

• They are a source of revenue for government spending

• They regulate the stock market

• They are used to increase the money supply

• They determine the federal funds rate