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WorksheetsMonetary and Fiscal Policy
Total questions: 20
Worksheet time: 7mins
Name
Class
Date
1.
If Congress increases government spending by the same amount it increases taxes aggregate demand will
a)
remain the same
b)
decrease, these are both contractionary
c)
increase
d)
shift down
2.
Which of the following results should be included where the question mark appears in the illustration?
a)
unemployment
b)
inflation
c)
consumer spending
d)
production
3.
Which of the following results should be included where the question mark appears in the illustration?
a)
the reserve requirement
b)
interest rate
c)
inflation
d)
unemployment
4.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
5.
What dollar amount should appear in place of the letter P in the table?
a)
$1,000,000
b)
$100,000
c)
$1,900,000
d)
$1,900
6.
What dollar amount should appear in place of the letter S in the table?
a)
$200,000
b)
$1,800,000
c)
$2,200,000
d)
$1,800
7.
What amount should replace the X in the table?
a)
$1,000
b)
$100,000
c)
$1,000,000
d)
$10,000
8.
What percentage should replace the Y in the table?
a)
20%
b)
5%
c)
10%
15%
15%
d)
2%
9.
Which items on the graph are part of M1?
a)
currency and savings deposits
b)
currency, traveler’s checks plus demand deposits, and other checkable deposits
c)
other checkable deposits, money market mutual funds, and small time deposits
d)
currency, savings deposits, and small time deposits
10.
In order for money to have value, it must have all of the following characteristics EXCEPT
a)
portability.
b)
durability.
c)
divisibility.
d)
plentiful availability.
11.
If the Federal Reserve raises interest rates to combat rapid inflation, what might be a negative outcome?
a)
Unemployment rates would rise
b)
taxes will rise
c)
The government would put a freeze on prices
d)
international trade would stop
12.
Which of the following is a monetary policy action used to combat a recession?
a)
cutting taxes
b)
increasing the money supply
c)
decreasing the money supply
d)
raising taxes
13.
The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT
a)
decreasing the discount rate.
b)
increasing the reserve requirement.
c)
selling securities on the open market.
d)
making banks hold a reserve for all types of deposits.
14.
If the Federal Reserve System wanted to stimulate the U.S. economy and reduce unemployment, it would
a)
A. cause interest rates to decrease because low interest rates encourage businessgrowth and expansion
b)
B. cause interest rates to rise because high interest rates encourage business growthand expansion
c)
C. increase the discount rate it charges banks, which would increase the money supply
d)
D. increase consumer spending by reducing the money supply
15.
If the Federal reserve and Government are attempting to encourage growth and stimulate the economy, which actions would each take?
(monetary / fiscal)
(monetary / fiscal)
a)
increase the Required reserve / increase government spending
b)
sell government securities / decrease taxes
c)
decrease the interest rate / increase government spending
d)
buy government securities / decrease government spending
16.
How much must the bank keep on hand if the Required Reserve is 10% and there is a deposit of $100.
a)
100
b)
110
c)
90
d)
10
17.
How much money must the bank keep on hand if the Required Reserve is 20% and there is a deposit of $1000.
a)
20
b)
50
c)
200
d)
1020
18.
If the federal government is attempting to encourage spending by consumers and businesses, a fiscal policy BEST serving this purpose would be
a)
decreasing taxes.
b)
decreasing government spending.
c)
reducing the investment tax credit.
d)
balancing the budget.
19.
The rate the Fed charges banks for a loan
a)
Discount rate
b)
Federal fund rate
c)
reserve ratio
d)
prime rate
20.
The MPC is .75. Congress increase government spending by $100 billion and increases taxes by $100 billion. The GDP
a)
increases by $800 billion
b)
decreases by $800 billion
c)
remains the same
d)
increases by $100 billion
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