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Unit 4: Fiscal and Monetary Policy (ET) Flashcards | StudBud
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Unit 4: Fiscal and Monetary Policy (ET)
Unit 4: Fiscal and Monetary Policy (ET)
30 terms
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#economics
Flashcards
30 cards
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Questions
30
Answers
1
Money is a medium of exchange if it is
widely accepted
durable
all of these
portable
2
How might the government act to fight inflation?
Increase taxes, increase government spending
Cut taxes, increase government spending
Increase taxes, cut government spending
Cut taxes, cut government spending
3
What are the tools the Fed can use to change the money supply?
stimulus payments, subsidies, stocks
tax policy, federal budget
eminent domain, currency power, banking laws
reserve requirement, discount rate, open market operations
4
What is the discount rate?
The rate of return on government bonds
The amount all retail stores are required to mark down goods
The interest rate the Fed charges banks to borrow money
The maximum rate banks can charge for consumer loans
5
The Federal Insurance Contribution Act (FICA) taxes withheld from this paycheck are used for
Unemployment Insurance
Medicaid and SNAP
Medicare and Social Security
Medicare and Crop Insurance
6
What are the Fed's monetary policy tools to fight recession?
lower the reserve requirement, lower the discount rate
lower the reserve requirement, raise taxes
increase the reserve requirement, increase the discount rate
lower taxes, increase government spending
7
"Every $1 in government spending creates more than $1 change in economic output" is known as...
the reserve requirement
money multiplier effect
the first law of economics
the first rule of investing
8
Demand is rising rapidly. Inflation is a concern. Where are we in the business cycle?
Contraction
Trough
Peak
Expansion
9
Which of the following is a function of money?
Divisibility
Acceptability
Durability
All of these
10
The percentage of deposits a bank must keep on hand is known as...
reserve requirement
credit limit
prime rate
magic ratio
11
Name this tax: The higher a person's income, the higher percentage that person pays in taxes.
Regressive
Progressive
Proportional
Excise
12
What is the most important job of the US Federal Reserve?
Monitoring the amount of money circulating in the US economy
Offering checking and savings accounts to private citizens
Making sure the US has a balanced budget
Serving as a clearing house for checks
13
Demand is rising rapidly. What fiscal policy can the government use to prevent inflation?
raise taxes
raise the discount rate
lower the reserve requirement
increase government spending
14
What type of fiscal policy is used to prevent recession?
Progressive fiscal policy
Regressive fiscal policy
Contractionary fiscal policy
Expansionary fiscal policy
15
When revenue and spending are equal, the budget is...
deficit
surplus
equal
balanced
16
What tools can the Fed use to shape monetary policy?
stock certificates, money markets, credit rating
trade policy and tariffs
tax policy, federal budget drafting
reserve requirement, discount rate, open market operations
17
When does the government have a budget deficit?
When it collects more money than it spends
When the President vetoes the budget
When it spends more money than it collects
When it collects and spends exactly the right amount
18
The president appoints members of the Federal Reserve Board of Governors.
False
True
19
In a contraction, what step might Congress take?
Increase taxes, increase government spending
Cut taxes, cut government spending
Increase taxes, cut government spending
Cut taxes, increase government spending
20
Who is in charge of fiscal policy?
The Federal Reserve
Individual consumers
President and the Congress
The banks
21
What is fiat money?
The US dollar has value because it is backed by gold
The US dollar has value because the government says it does
The US dollar has value because it is backed by silver
The amount of money the government must keep on hand
22
What is the difference between a sales tax and and excise tax?
Sales taxes are applied only to services
Excise tax applies to many items; sales tax applies to a few
Excise tax applies to a few items; sales tax applies to many
Excise taxes are only collected on imports
23
Demand is rising rapidly. What monetary policy can the Fed use to prevent inflation?
cut government spending
increase taxes
raise the discount rate
buy government bonds
24
How many Federal Reserve regional member banks are there?
50
1
12
none
25
What type of tax stays the same as a percentage of income?
Regressive Tax
Sales Tax
Proportional Tax
Progressive Tax
26
Which events signal a contraction in the economy?
rising consumer spending and falling unemployment
falling consumer spending and rising unemployment
rising stock market and falling home prices
rising home sales and falling unemployment
27
How does lowering the reserve requirement increase the money supply?
Bond sales put more money into the economy
The budget surplus reduces the national deficit
Banks are able to loan more money to businesses and people
People pay less taxes, which gives them more money to spend
28
How does reducing the reserve requirement affect the money supply?
has no effect on the money supply
decreases the money supply
increases the money supply
shuts down the money supply
29
What are the government's fiscal policy tools to fight recession?
reduce the reserve requirement and lower the discount rate
increase taxes and decrease government spending
reduce taxes and increase government spending
increase the reserve requirement and raise the discount rate
30
Cutting taxes is a fiscal policy option during a contraction because...
it will lead to a budget surplus
it gives consumers more money to spend on goods & services
it lowers the discount rate, so they can get loans
it reduces the money supply and helps them save
