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Fiscal & Monetary Policy Flashcards | StudBud
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Fiscal & Monetary Policy
Fiscal & Monetary Policy
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StudBud Administration
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An #economics exam quiz reviewing #fiscalpolicy and #monetarypolicy
Flashcards
30 cards
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Practice quiz
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Questions
30
Answers
1
The total amount of money the federal government owes to bondholders is called:
national deficit
budget surplus
federal budget
national debt
2
The belief that free markets regulate themselves is called:
supply-side economics
Keynesian economics
demand-side economics
classical economics
3
The amount of deposits that banks are required to keep on hand is called:
reserve requirements
federal funds rate
money creation
monetary policy
4
The process by which money enters into circulation is called:
outside lag
monetary policy
check clearing
money creation
5
According to Keynesian economics the government could reduce the severity of inflation by:
applying a contractionary fiscal policy
increasing federal spending
increasing transfer payments
applying an expansionary fiscal policy
6
What is one result of a high money supply?
low investment spending
contraction in the economy
low interest rates
contraction in demand
7
Fiscal policy used to reduce economic growth through decreasing spending and increasing taxes
contractionary policy
crowding-out policy
expansionary policy
monetary policy
8
Why doesn't the federal government reduce the budget deficit by creating more money?
the Constitution forbids the government from doing so
creating more money could lead to hyperinflation
US creditors would not accept the money at face value
having too much money in circulation leads to deflation
9
Jane is a supporter of supply-side economics so she believes that:
tax cuts have little impact on worker productivity
taxes have a strong negative effect on economic output
fiscal policy is a tool to increase demand for goods
demand for goods increases when prices rise
10
What action might an interventionist economist suggest for an economy in a recession?
allow regional banks to make individual decisions
take a laissez-faire approach to the economy
wait until economy corrects itself
enact new fiscal and monetary policies
11
The time it takes to implement monetary policy is known as:
inside lag
multiplier effect
outside lag
reserve requirements
12
An example of an automatic stabilizer would be:
taxes
savings bonds
interest rates
inflation
13
Use of government spending and revenue collection to influence the economy
fiscal policy
classical economics
supply-side economics
monetary policy
14
Idea that every 1 dollar change in fiscal policy creates change much greater than 1 dollar:
fiscal effect
automatic stabilizer
contractionary policy
multiplier effect
15
Which of the following is one way the Federal Reserve Bank serves the government?
making loans to government officials
financing state government projects
minting coins for the government
selling government securities
16
When budget revenues exceed expenditures
balanced budget
budget deficit
fiscal policy
budget surplus
17
What allows the government to spend a specific amount of money?
appropriation bill
contractionary policy
fiscal policy
treasury note
18
Actions the Federal Reserve System takes to influence the real GDP and the rate of inflation:
monetary policy
money creation
fiscal policy
Open market operations policy
19
Who controls the Federal Reserve System?
Congress
Federal Reserve member banks
the Board of Governors
the President
20
The school of thought based on the idea that the supply of goods drives the economy is called:
Keynesian economics
supply-side economics
demand-side economics
classical economics
21
What is the interest rate called that the Federal Reserve charges commercial banks for loans?
multiplier effect rate
prime rate
required reserve rate
discount rate
22
The Federal Reserve regulates the required reserve ratio in order to:
change the discount rate more easily
reduce lags in monetary policy
control the amount of money in circulation
discourage banks from making risky loans
23
How are interest rates and demand for loans related?
when interest rates decrease, demand for loans decreases
interest rates are determined by demand for loans
when interest rate increase, demand for loans decreases
when interest rates change, demand for loans is not affected
24
Which of the following contributes to the crowding-out effect?
a federal budget deficit
reduced federal spending
a federal budget surplus
increased federal taxes
25
The time that it takes for monetary policy to have an effect on the economy is called:
tight money lag
outside lag
inside lag
sideway lag
26
What type of policy should the Fed use to counteract a rapid expansion causing high inflation?
tight money policy
money creation
easy money policy
money multiplier
27
Fiscal policy used to encourage economic growth through increasing government spending
contractionary policy
monetary policy
expansionary policy
automatic stabilizer policy
28
Buying and selling of government securities in order to alter the supply of money is called:
tight money policy
open market operations
fiscal policy
inside lag
29
Why does a bank hold a fraction of deposits in reserve?
to make check clearing easier
to be sure it can meet customer demands
to make interest rates go up
to protect themselves from the high cost of borrowing
30
How did the Gramm-Rudman-Hollings Act try to prevent budget deficits?
require Congress to raise more revenue to cover all spending
reduce payments for entitlements if budget was not balanced
allow Congress greater flexibility to cut federal spending
create automatic spending cuts if deficit went over set $$
