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The Federal Reserve institutes a tight monetary policy in order to reign in inflation. What is a likely consequence of such action?
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Which of these actions of the Federal Reserve can slow economic growth?
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Econ Unit 5
| Question | Answer |
|---|---|
| The Federal Reserve institutes a tight monetary policy in order to reign in inflation. What is a likely consequence of such action? | The unemployment rate will rise |
| Which of these actions of the Federal Reserve can slow economic growth? | The Federal Reserve increases the discount rate, which causes interest rates to rise and people to save rather than to spend. |
| The process by which the Federal Reserve controls the supply, availability, and cost of money in order to keep the economy stable is | monetary policy |
| What is the effect of an expansionary fiscal policy upon an economy with and increasing budget deficit and growing national debt | Increased deficit spending and decreasing or shrinking national debt |
| When the federal reserve sells government securities on the open market, what effect does this action have on the nations money supply and interest rates | Money supply decreases/ Interest rates increase |
| Fearing a recession, the government decides to give citizens a tax rebate check to buy Christmas gifts. What is a possible outcome of this action? | high rates of inflation |
| Many local governments rely on sales taxes for much of their revenue. When they have budget shortages, why do they not simply raise rates as needed? | Higher rates could drive business to other countries |
| Which pairs of operations BEST fit with fiscal policy? | government spending and regulation |
| The economy is experiencing rapid inflation, pushing above 9%. Which fiscal policy action should the government implement in an attempt to fix this problem? | raise taxes |
| How will a contractionary fiscal policy affect a budget deficit? | shrink the deficit |
| Which of these is MOST LIKELY to occur after the government increases taxes? | consumer spending decreases |
| What consumer behavior is the Federal Reserve Board trying to encourage when it implements a loose monetary policy? | decreased saving and increased spending |
| What is the name of the "central bank" of the United States? | The Federal Reserve |
| You want a new truck. How can the Federal Reserve's raising of the discount rate affect your decision to purchase the truck? | It will raise interest rates and make your truck payment higher |
| If the federal government wants to encourage businesses and consumers to spend more money, it would MOST LIKELY | decrease the tax rate |
| State governments often decide to place a "sin tax" on specific products or goods, like alcohol and tobacco. Which rationale is LEAST LIKELY to encourage governments to adopt a "sin tax"? | "Sin taxes" disproportionately affect lower income groups |
| The federal government uses government spending and tax rates to help control recessions and encourage economic activity. This is called | fiscal policy |
| The Federal Reserve has kept interest rates very low. Some might argue that this could lead to | inflation |
| Which action by the Federal Reserve would help to slow down rising inflation? | sell bonds |
| -Setting the discount and interest rates -Establishing reserve requirements for banks -Buying and selling US Government Securities All of these are ways in which the federal reserve system can | regulate the money supply |
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LONAHENDERSON
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