Economics Exam CH 15-16

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ow quickly can an increase in government spending increase the gross domestic product?

6 months

An example of contractionary fiscal policy would be

decreasing government spending.

Keynesian economics failed to deal successfully with

high inflation during the 1970s.

The purpose of expansionary fiscal policy is to

increase output.

Which of the following is one way the Federal Reserve Bank serves the government?

selling government securities

In contrast with classical economics, Keynesian economics

takes a broader view of the economy.

Supporters of supply-side economics believe that

taxes have a strong negative influence on economic output.

All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT

the need for discretionary spending.

What is the cost of money?

the price of the interest rate

When revenues exceed expenditures,

there is a budget surplus.

What type of policy does the Federal Reserve use to counteract an expansion that is causing high interest rates?

tight money policy

Why does a bank sometimes hold excess reserves?

to be sure they can meet their customers' demands

Why does the Federal Reserve alter monetary policy?

to lessen the effect of natural business cycles

How many Federal Reserve Districts are there?

12

What does "lender of last resort" mean with respect to the Federal Reserve?

It will lend money to a bank in a financial emergency.

What happens during a bank run?

More customers withdraw money than the bank has on hand.

The federal budget is put together

by Congress and the White House.

An example of expansionary fiscal policy would be

cutting taxes.

The Office of Management and Budget

is responsible for deciding how much money each government agency receives in the budget.

When you buy a United States Savings Bond, you

loan money to the government.

All of the following are problems associated with high national debt EXCEPT that it

makes investing in treasury bonds, notes, and bills very risky.


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