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WorksheetsTopics 8 and 9: Fiscal and Monetary Policy
Total questions: 60
Worksheet time: 30mins
The Federal Reserve System was officially established in
1790
1811
1836
1913
The Federal Reserve has a total of _____ regional banks that represent various districts in the U.S.
7
15
12
21
All of the following are true about the Federal Reserve EXCEPT
the Federal Reserve is overseen by a seven-member Board of Governors
the Federal Reserve building is headquartered in Washington, DC
the Board of Governors are appointed by the Chairman of the Board of Governors
there are 12 districs, 1 bank for each district, that make up the network of the Federal Reserve System
The Federal Reserve is responsible for enacting
monetary policy
fiscal policy
demand policy
federal policy
Key decision-making about interest rates and buying and selling government securities (in the form of bonds) are made 6 times a year by the
Federal Open Market Committee
Office of Management and Budget
Congressional Budget Office
President of the U.S.
The current chairman of the board for the Federal Reserve is
Janet Yellen
Ben Bernanke
Joe Biden
Jerome Powell
The ease at which something can be converted from its value to its use as a medium of exchange would reflect its
levity
liquidity
equitability
efficacy
Why is using money as a medium of exchange preferable to bartering?
The relative value of bartered goods remains the same over time.
The value of money fluctuates over time.
The relative value of goods is difficult to establish in a barter system.
The value of bartered goods decreases after they are purchased.
Which characteristic of money does this cartoon relate to?
money has a limited supply
money is uniform
money is divisible
money is durable
If you look closely at this dollar bill, you will notice that at the top, it says "Silver Certificate" where most dollar bills say "Federal Reserve Note." How is this bill different from most dollar bills that you see?
There are no differences between the silver certificate and the Federal Reserve note.
The Federal Reserve note is backed by something of value, and the silver certificate is backed by the government.
The silver certificate is fiat money, and the Federal Reserve note is representative money.
The Federal Reserve note is fiat money, and the silver certificate is representative money.
"I believe that banking establishments are more dangerous than standing armies." —Thomas Jefferson
Why did Thomas Jefferson and other Antifederalists hold the view described here?
They feared the wealthy would gain control of the bank and use it to increase power.
They feared a national bank would do a poor job of protecting deposits.
They wanted to promote industry and trade.
They didn't believe a national bank would be strong enough.
Look at this political cartoon. What was the effect of Jackson's destruction of this "monster"?
The United States entered a period of relative financial stability.
The Free Banking Era began.
The National Bank became the only institution to issue currency.
The United States effectively went on the gold standard.
In the early days of our nation, a strong centralized bank was favored by __________.
the Federalists
the Antifederalists
Thomas Jefferson
the entire nation
The Federal Reserve System was created as a result of the need for financial stability shown by what event?
the collapse of the First Bank of the United States
the Panic of 1907
the Great Depression
WWII
Which of the following is a tool that the Fed uses to regulate the money supply?
bank examinations
check clearing policies
issuing of goverment checks
reserve requirements
The Federal Reserve System acts as a lender of last resort to what group?
businesses in general
consumers
federal government
financial institutions
Which of the following situations would encourage people to invest their money in a savings account rather than keep it in cash?
falling interest rates
rising interest rates
rising demand for money
rising prices
All of the following would represent very liquid assets EXCEPT
checking account
traveler's checks
demand deposits
2 bedroom condo
This type of money has no intrinsic value; its value comes from the government's mandate that we accept it as a form of payment.
curved money
fiat money
commodity money
federal money
If the Federal Open Market Committee decides to decrease the money supply, then the Federal Reserve
sells bonds to the banks
buys bonds from the banks
prints money
sells stocks
The percentage of each deposit that the bank must hold in their vault, or on record with the Fed, is determined by the
discount rate
required reserve ratio
federal funds rate
money multiplier
If a member bank borrows money from the Fed, they must pay the Fed back with interest. This is known as the
discount rate
federal funds rate
required reserve ratio
money supply
Money that is easily accessible in the economy, such as the cash in the cash register at Target is part of
M1
M2
M3
M4
If the Federal Reserve wants to increase the money supply they can do all of the following EXCEPT
reduce the Required Reserve Ratio
reduce the discount rate
purchase government bonds
sell government bonds to the banks
If a member bank borrows money from another member bank, the rate they charge each other for loans is the
discount rate
required reserve ratio
federal funds rate
money multiplier
All of the money that is in various forms of savings, such as Certificates of Deposit, or money that is slightly more difficult to obtain falls in the category of
M1
M2
M3
M4
What is the current required reserve ratio?
there isn't one
10%
15%
20%
Which tool of monetary policy does the Federal Reserve use most often?
closed-market operations
open-market operations
changes in reserve requirements
changes in the discount rate
If the RRR is 20%, what would a bank be required to hold in required reserves on a $10,000 deposit
$1,000
$2,000
$200
$2500
What does "lender of last resort" mean with respect to the Federal Reserve?
It will lend money to a bank in a financial emergency
It makes decisions about who a bank can lend money to
It decides interest rates for interbank loans
It has the power to decide how much money a bank can lend out
How did the abandonment of the gold standard help the economy during the Great Depression?
it allowed the President to take over failed banks that held gold.
It allowed the Federal Reserve to base the value of the dollar on gold.
It allowed the Federal Reserve to increase the money supply.
It allowed the government to insure deposits.
What is one effect of a nation being on the gold standard?
The nation's money supply is limited.
Only the U.S government can issue currency.
State governments and banks can issue currency if they have gold.
The U.S. Treasury can issue money to support a growing economy.
Which characteristic of money is being described?
People need to be able to take money with them as they go about their business
divisibility
portability
uniformity
durability
Which characteristic of money is being described?
Money must be controleld so that there is not too much in the economy and therefore reduced in value.
acceptability
durability
limited supply
divisibility
Which characteristic of money is being described?
Money must be able to withstand the wear and tear that comes with being used over and over again
divisibility
portability
durability
acceptability
Money helps people compare relative values of goods/services, allows people to discuss something's "worth" and helps give meaning to profits and losses. In this way, money serves which role/function in society?
unit of account
medium of exchange
store of value
measure of inflation
Marnie finds $100 in cash in her backyard from a time capsule she buried in 2000. She takes it out, takes it to the bank and they credit her checking account with $100. This represents which function of money?
store of value
medium of exchange
unit of account
portability
Which of the following is a negative aspect of bartering rather than using currency?
Bartering requires you to find someone who wants what you have.
Bartering does not require you to have any cash.
Bartering usually takes less time than using currency.
Bartering makes it easy to determine the relative value of items.
Which of the following is the best example of commodity money?
quarters
dollar bills
salt
silver certificates
The fact that the U.S. Dollar is widely acceptable, can be traded for thousands of goods and services, and even converted into other forms of currency indicates that the U.S. Dollar performs which function of money very well?
unit of account
medium of exchange
store of value
divisibility
What do taxes collected under the Federal Insurace Contribution Act (FICA) fund?
Social Security and ObamaCare
Medicare and Social Security
Medicare and Medicaid
Medicaid and Supplemental Security Income
The form used to file your taxes at the end of every year is known as a
tax refund
tax return
tax surplus
tax rebate
An exmaple of contractionary fiscal policy would be
cutting taxes
decreasing government spending
increasing production of consumer goods
expanding the government's role in regulating private industry
When the federal government’s revenues equal its expenditures (they don’t spend more/less than they generate in taxes) in any particular year, then they have a
balanced budget
budget surplus
budget deficit
fiscal equality
Government agencies generate their income from _____________, which then becomes government _____________, or money available for spending.
taxes/saving
taxes/revenue
revenue/taxes
revenue/saving
Gary earns $200,000, while Holly earns $70,000 a year. Their country taxes Gary at 15%, or $30,000, and taxes Holly 10%, or $7,000. This is an example of a _______________________ tax.
proportional
progressive
regressive
sales
James earns $350,000, while Brett earns $50,000 a year. If a 6% tax were levied on their incomes, James would pay $21,000 in taxes, while Brett would pay $3,000. This is an example of a _______________________ tax.
proportional
regressive
progressive
excise
Selena earns $50,000/year and Colleen earns $150,000/year. They each make a $40,000 purchase at 5% sales tax. The cost of the tax for Selena is $2000, or 4% of her income. The cost of the tax is also $2,000 for Colleen, but is only 1% of her total income This is an example of a _______________________ tax.
proportional
progressive
regressive
tariff
An example of expansionary fiscal policy would be
cutting taxes
cutting government spending
cutting production of consumer goods
cutting prices of consumer goods
All of the following are involved in creating fiscal policy EXCEPT
Office of Management and Budget
Congress
President
Vice President
What are the government's tools of fiscal policy?
taxation and government spending
open market operations and interest rates
taxation and required reserve ratio
government spending and required reserve ratio
Suppose Tristan earns $40,000 per year, Isabell earns $70,000 per year, and Mallory earns $150,000 per year. Under a regressive tax, who would pay a greater percentage of their income in taxes?
Tristan
Isabell
Mallory
none of them
How are mandatory funding and discretionary funding different?
Mandatory funding is fixed by law and discretionary funding can change.
Mandatory funding can change and discretionary funding is fixed by law.
Mandatory funding is capped at a set amount and discretionary funding is not.
Mandatory funding is not capped at a set amount and discretionary funding is.
Where does our federal government spend the most in discretionary spending?
Social Security
defense spending
veterans' pensions
unemployment insurance
What is a federal tax on money inherited from a deceased loved one?
an estate tax
a gift tax
an excise tax
a tariff
What is a progressive tax?
when the federal government uses taxpayer money to fund health and retirement benefits
when the taxpayer is allowed to make deductions before tax is taken out
when the tax rate rises with the amount of taxable income
when workers are able to file an "unemployment compensation" claim
An example of a tax that is designed to affect behavior is a(n)
excise tax on harmful substances.
sales tax that excludes everyday items.
payroll tax on all workers.
flat tax that treats all income equally.
When you buy a United States Savings Bond, you
loan money to the government
borrown money from a savings and loan association
donate money for special government projects
pay for your child's college education
What is the biggest source of tax revenue for local governments?
estate taxes
income taxes
property taxes
tariffs
Which is the largest area of mandatory spending in the federal budget?
Social Security
Medicare
Defense
Medicaid
