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Fiscal and monetary policy review

Total questions: 50

Worksheet time: 35mins

Name
Class
Date
1.
Fiscal Policy is concerned with
a)
Government Spending and taxation
b)
Consumer spending and productivity
c)
Government spending and the money supply
d)
Taxation and inflation
2.

An example of expansionary is what? (Multiple answers - must pick all to receive credit)

a)

Decrease taxes

b)

Raise taxes

c)

Government spends more on Science research

d)

Government cuts organizations like the National Science Foundation

3.

Examples of contractionary fiscal policy includes which of the following (choose all correct answers)?

a)

Raise taxes on corporations

b)

Lower the corporate tax rate

c)

Government increases spending on research in Antarctica

d)

Government cuts spending on education

4.

Which is NOT one of government's role in the economy?

a)

Protecting property rights

b)

Maintaining competition

c)

Protecting consumers, savers, and investors

d)

Protecting monopolistic corporations

5.

What is an example of a positive externality?

a)

Air pollution from factories

b)

Eminent domain

c)

Allowing people to smoke on school campuses

d)

A student getting immunizations in order to go to school

6.

The goals of monetary policy include (more than one answer - pick all correct answers for credit):

a)

regulating the amount of money circulating in the economy

b)

Keep inflation high

c)

Keep inflation low

d)

Keep unemployment low

e)

Raise the unemployment levels

7.
a rise in the cost of goods and services
a)
inflation
b)
discount rate
c)
interest
d)
monetary policy
8.

Fee charged by the Federal Reserve Bank for other member banks to borrow money from the FED through the discount window?

a)

inflation

b)

interest

c)

discount rate

d)

reserve requirement

9.

The goal of monetary policy is to

a)

sell bonds

b)

reduce unemployment

c)

prevent inflationary and recessionary economic periods

d)

increase tariffs on foreign countries

10.

"The Fed" refers to the....

a)

Federal Bureau of Investigation

b)

Federal Government

c)

Federal Reserve System/Bank

d)

Federal Income Tax

11.
The federal government is attempting to encourage spending by consume rs 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
12.
If the United States is experiencing inflation, the Fed will likely
a)
Increase the supply of money in the economy
b)
Decrease the supply of money in the economy
13.
In a recession, the Fed would likely
a)
Increase the supply of money in the economy
b)
Decrease the supply of the money in the economy
14.
Does increasing the money supply cause inflation or deflation?
a)
Inflation
b)
Deflation
15.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
16.
Raising the discount rate will reduce
a)
unemployment
b)
inflation
17.

What are two main monetary tools the government has?

a)

government spending and reserve requirement

b)

taxes and government spending

c)

buy/selling bonds and discount rate

d)

discount rate and taxes

18.

Choose the 2 answers below that are fiscal policy tools of the Federal Government

a)

Local referendums

b)

Taxes

c)

Discount Rate

d)

Government Spending

19.

If the economy was going into a recession, what would the Federal government do with taxes?

a)

increase them

b)

do nothing

c)

decrease them

20.

If the economy was going into an inflationary period, what would the Federal government do with government spending?

a)

increase it

b)

do nothing

c)

decrease it

21.

SELECT the 3 Correct Answers that correspond to: Buy Bonds

a)

Monetary Policy

b)

Contracts the economy

c)

Government

d)

The Federal Reserve

e)

Expands the economy

22.

SELECT the 3 Correct Answers that correspond to: SELL Bonds

a)

Monetary Policy

b)

Contracts the economy

c)

Government

d)

The Federal Reserve

e)

Expands the economy

23.

SELECT the 3 Correct Answers that correspond to: Increase Spending

a)

Fiscal Policy

b)

Contracts the economy

c)

Government

d)

The Federal Reserve

e)

Expands the economy

24.

SELECT the 3 Correct Answers that correspond to: DEcrease Spending

a)

Fiscal Policy

b)

Contracts the economy

c)

Government

d)

The Federal Reserve

e)

Expands the economy

25.

SELECT the 3 Correct Answers that correspond to: DEcrease Taxes

a)

Fiscal Policy

b)

Contracts the economy

c)

Government

d)

The Federal Reserve

e)

Expands the economy

26.

SELECT the 3 Correct Answers that correspond to: INcrease taxes

a)

Fiscal Policy

b)

Contracts the economy

c)

Government

d)

The Federal Reserve

e)

Expands the economy

27.

Government DEFICITS cause the NATIONAL DEBT to:

a)

Fiscal Policy

b)

decrease

c)

Government

d)

The Federal Reserve

e)

increase

28.

Government Surpluses cause the NATIONAL DEBT to:

a)

Fiscal Policy

b)

decrease

c)

Government

d)

The Federal Reserve

e)

increase

29.
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.
30.
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
31.
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
32.
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
33.
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
34.
Who is in charge of fiscal policy?
a)
Government
b)
Federal Reserve
35.
If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?
a)
Selling securities on the open market
b)
Raising interest rates
c)
Reducing government spending
d)
Raising reserve requirements
36.

Which combination of fiscal and monetary policy would speed up the economy?

a)

increase taxes; decrease reserve requirement

b)

decrease taxes; decrease discount rate

c)

increase spending; increase interest on reserves

d)

decrease spending; sell bonds via open market operations

37.

Which of the following is NOT a feature of expansionary fiscal policy?

a)

Decrease aggregate demand

b)

Increase government spending

c)

Cut taxes

d)

Decrease unemployment

38.

Keynesian followers believe this entity should increase demand during contractions

a)

Federal Government

b)

Federal Reserve

c)

State Governments

d)

Individual Producers

39.

What happens when the FED lowers interest rates, lowers the reserve requirements, or buys securities on the open market?

a)

the C and the I increase. GDP goes up. Unemployment goes down. Inflation rises

b)

the C and I increase. GDP goes down. Unemployment goes down. Inflation rises

c)

the C and I decrease. GDP goes up. Unemployment goes up. Inflation goes down

40.

Raising the reserve requirement reduces the amount of _____________ and lowering it pumps more money into the economy.

a)

money in circulation

b)

taxes on corporations

c)

sales tax

41.
“Observers… speculate what may happen to the American economy if lawmakers implement similar austerity measures to tackle the deficit quickly. Many economists … have instead said officials need to get the economy on a long-term sustainable path without cutting too much in the short term and putting the economy back in a ditch.”
a)
Monetary Policy
b)
Fiscal Policy
c)
Both Monetary and Fiscal Policy
42.
“...Officials decided to announce they would keep interest rates near zero until the unemployment rate drops to 6.5%.” 
a)
Monetary Policy
b)
Fiscal Policy
c)
Both Monetary and Fiscal Policy
43.
When the government spends more money than they take in each year is called a _________?
a)
Debt
b)
Deficit
c)
Surplus
d)
Expansionary
44.

These are IOUs from the U.S. government to people that finance a little piece of the government's debt in exchange for a very small amount of interest

a)

Government Bonds, or Securities

b)

Government Credit

c)

Government Cash

d)

Government Holdings

45.

Fiat money is

a)

money is checking accounts.

b)

money that has intrinsic value on its own.

c)

specially created from the Federal Reserve.

d)

money that is only valuable because the government says it is.

46.
Open market operations are
a)
the processes by which money enters into circulation. 
b)
reserves greater than the required amounts
c)
the buying and selling of government securities to alter the supply of money.
d)
rates of interest banks charge on short-term loans to their best customers.
47.

The most desirable budget outcome is

a)

a balanced budget.

b)

a surplus budget.

c)

a deficit budget

d)

one appropriate for current economic conditions.

48.

A budget deficit is a

a)

net leakage from the circular flow of income.

b)

net injection into the circular flow of income

c)

a leakage.

d)

an injection

49.

The impact lag for fiscal policy is

a)

shorter than for monetary policy.

b)

longer than for monetary policy.

c)

about the same as for monetary policy.

d)

long and indeterminate

50.

Stagflation is caused by

a)

an increase in aggregate demand

b)

a decrease in aggregate demand

c)

an increase in aggregate supply

d)

a decrease in aggregate supply

e)

an increase in the money supply

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