Econ Unit 5
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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? | The unemployment rate will rise
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| 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.
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| 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
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| 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
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| 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
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| 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
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| 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
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| Which pairs of operations BEST fit with fiscal policy? | government spending and regulation
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| 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
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| How will a contractionary fiscal policy affect a budget deficit? | shrink the deficit
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| Which of these is MOST LIKELY to occur after the government increases taxes? | consumer spending decreases
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| What consumer behavior is the Federal Reserve Board trying to encourage when it implements a loose monetary policy? | decreased saving and increased spending
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| What is the name of the "central bank" of the United States? | The Federal Reserve
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| 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
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| If the federal government wants to encourage businesses and consumers to spend more money, it would MOST LIKELY | decrease the tax rate
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| 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
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| The federal government uses government spending and tax rates to help control recessions and encourage economic activity. This is called | fiscal policy
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| The Federal Reserve has kept interest rates very low. Some might argue that this could lead to | inflation
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| Which action by the Federal Reserve would help to slow down rising inflation? | sell bonds
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| -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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