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5 - Unit 5: Monetary & Fiscal Policy and Taxes (FCHS) Flashcards | StudBud
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5 - Unit 5: Monetary & Fiscal Policy and Taxes (FCHS)
5 - Unit 5: Monetary & Fiscal Policy and Taxes (FCHS)
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Monetary & Fiscal Policy Taxes
Flashcards
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Questions
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Answers
1
If the Fed reduces the money supply, which of the following would be true?
The fed must have lowered the discount rate
Interest rates will increase
It will stimulate the economy
The Fed must have sold bonds
2
Tightening the money supply causes interest rates to
increase
fluctuate
decrease
stabilize
3
process by which the gov't manages spending & taxes to influence the direction of the economy
monetary policy.
trade policy.
fiscal policy.
tax policy.
4
The economy is experiencing rapid inflation, pushing above 9%. Which fiscal policy?
Increase Spending
Increase reserve requirements
Raise taxes
Decrease Interest Rates
5
One of the most important ways local governments raise revenue is through
property taxes.
driver’s license fees.
business licenses.
income taxes
6
The interest the Fed charges on loans to financial institutions.
open market operations
discount rate
reserve requirements
interest on required & excess reserves
7
The total amount of money borrowed over time by the government.
balanced budget amendment
national debt
budget deficit
federal budget
8
Which of the following involves the gov't buying and selling securities in financial markets?
Interest on required and excess reserves
Discount rate
Reserve requirements
Open market operations
9
Why does the United States use the ability to pay principle?
People complain less about the taxes they pay.
It is easy to figure out
It is easy to hide the true tax rate.
People should pay for the services they receive.
10
Taxes adversely affect the allocation of resources in society because
not everyone pays taxes.
the taxes collected are not enough to finance gov't.
they do not always fall more heavily on the rich.
the gov't not the market decides how the money is spent.
11
Federal Reserve wants to increase the money supply in United States. What is it likely to do?
increase the reserve requirement for banks
reduce the discount rate
sell securities on the open market
require banks to hold a reserve for all types of deposits
12
money has to provide a way of converting goods & services into an easily storable form
store of value
medium of exchange
limited availability
measure of value
13
FICA includes taxes to pay for
Unemployment and Medicare
Social Security and Unemployment
Social Security and Medicare
Medicare and Workers’ Compensation
14
Which of the following is an example of money serving as a medium of exchange?
Marian buys a carbo-loaded drink before a marathon.
Richard puts money into a piggy bank.
Ellen deposits cash into a money market account.
Sean determines that both a book and chicken cost $5.
15
Which fiscal policy would be most appropriate to use to get out of the recession?
buy bonds on the open market
decrease taxes
decrease gov't spending
raise the reserve requirement
16
Which of these is MOST LIKELY to occur after the government increases taxes?
The national debt increases.
Consumer spending decreases.
Annual deficits increase.
Government programs decrease.
17
Taxes can have all of the following economic effects EXCEPT
changing people’s buying behavior.
removing sources of revenue.
decreasing productivity and growth.
altering resource allocation.
18
Fearing a recession, gov't decides to give a tax rebate to buy Christmas gifts. What happens?
higher rates of inflation
lower interest rates
higher interest rates
lower rates of inflation
19
What would MOST LIKELY happen if the Federal Reserve System lowered interest rates?
Trade would increase over the long run.
The price of goods would remain stable over the long run.
Unemployment would be reduced in the short run.
The demand for goods would decrease in the short run.
20
What type of tax does the state place on your wages?
income tax
sales tax
customs & duties
sin tax
21
How might monetary policy be used to combat inflation fears? The Federal Reserve might
lower taxes.
raise interest rates.
raise taxes.
lower interest rates.
22
How does a monetary policy of low interest rates affect consumers?
It lowers savings rates.
It lowers the cost of imports.
It promotes deflation.
It lowers spending rates.
23
The economy is experiencing negative GDP growth and high unemployment. Which fiscal policy?
Raise taxes
Decrease Interest Rates
Increase Spending
Increase reserve requirements
24
Which type of tax would a company have to pay if it bought its products from a foreign country?
payroll tax
excise tax
estate tax
customs & duties
25
What will increased budget surpluses do to the national debt?
shrink the debt
change monetary policy
not affect it
grow the debt
26
All of the following are effects of the federal debt EXCEPT
income distribution is altered.
interest rates are lowered.
purchasing power is transferred.
incentives to work, save, and invest are decreased.
27
The benefit principle of taxation states that
those who benefit from gov't services should pay for them.
taxes benefit the economy as a whole.
gov't should assess taxes only if there is a clear benefit
people should be taxed according to their ability to pay.
28
group in Federal Reserve determines growth of the money supply & the level of interest rates
Fed. open market committee
Fed. advisory council
Board of governors
Fed. security council
29
When the Federal Reserve buys securities on the open market, they are hoping to
shrink the money supply and discourage inflation.
reduce amount of $ banks are required to hold in reserves.
increase interest rates which will then increase GDP.
expand the money supply and increase GDP.
30
This type of money exists because the government says it is money.
Fiat money
Barter
Commodity money
Gold standard
31
How will a contractionary fiscal policy affect a budget deficit?
grow the deficit
not affect it
change monetary policy
shrink the deficit
32
The gasoline tax is based on the __________ principle of taxation.
excise
graduated
ability-to-pay
benefit
33
All banks are required to
be holding companies.
maintain reserves against deposits.
report every loan to the Fed.
loan out all customer deposits.
34
Which statement is MOST LIKELY true if the Fed incr the reserve requirement & discount rate?
loans are difficult to get because little $ is circulating
the economy is in a trough
they are trying to limit inflationary pressures
there has been a recent increase in taxes
35
This is where the government spends more than it takes in for the year.
national debt
federal budget
balanced budget amendment
budget deficit
36
A tax placed on cigarettes if the gov't wanted to discourage people from smoking?
sales tax
customs & duties
income tax
sin tax
37
The Federal Reserve System might try to expand Aggregate Demand by
buying more government bonds
increasing the discount rate.
increasing taxes.
increasing the reserve requirement.
