Economy chapter 15 & 16Multiple Choice
What does fiscal policy do
Changes in government spending and taxation
Which parts of the federal government put together the federal budget?
Congress and the White House
What are the two major problems associated with a large national debt?
Decreases the amount of money available to be borrowed by business, money spent on the debt cannot be spent on other things.
How does the Fed encourage banks to loan more money? a. by reducing the discount rate b. by increasing the interest rate allowed c. by borrowing from their own member banks d. by increasing the reserves required of banks
a
The purpose of expansionary fiscal policy is to . . . a. increase output. b. prevent hyperinflation. c. slow the growth of the GDP. d. increase the separation between government and private industry.
a
What banks must join the Federal Reserve system? a. all nationally chartered banks b. all state-chartered banks c. all banks of any kind d. no banks must joins membership is voluntary
a
What does lender of last resort mean with respect to the Federal Reserve? a. It will lend money to a bank in a financial emergency. b. It makes decisions about who a bank can lend money to. c. It decides interest rates for interbank loans. d. It has the power to decide how much money a bank can lend out.
a
What does monetary policy do? a. It alters the supply of money. b. It changes the way that taxes are collected. c. It charters new banks. d. t mints new coins and prints bills.
a
What is the function of a bank examiner? a. to make sure that banks are obeying laws and regulations b. to respond to banks about their daily reports to the Fed c. to carry on day-to-day functions within the bank d. to oversee decisions about major loans by each bank
a
Who appoints the members of the Board of Governors of the Federal Reserve? a. US. President b. the US, senate c. the state governors d. the state legislatures of the states represented
a
Why does the government sometimes use an expansionary fiscal policy? a. to encourage growth and try to stop or prevent a recession b. to expand the government's control over non-defense spending c. to control the demand for consumer goods and services d. to slow the economy because fast-growing demand can exceed supply
a
A budget surplus occurs when a. the market is at equilibrium. b. revenues exceed expenditures. c. there is very high inflation. d. expenditures exceed revenues.
b
An example of contractionary fiscal policy would be . . . a. cutting taxes. b. decreasing government spending. c. increasing production of consumer goods. d. expanding the government's role in regulating private industry.
b
How does a bond sale made by the Fed affect the money supply? a. The sale increases the money supply. b. The sale decreases the money supply. c. The sale increases the money supply but not in the proportion that the multiplier effect would suggest. d. It does not affect the money supply.
b
How many Federal Reserve Districts are there? a. 6 b. 12 c. 14 d. 18
b
It is difficult for the government to increase or decrease spending because a. most government officials are reluctant to authorize these changes. b. more than half of all government spending is on entitlements. c. taxpayers get upset when the government stops paying for something d. states may have different goals and may not agree with the changes.
b
What is one of the major uses of government fiscal policy? a. to keep the amount of taxes collected directly from residents low b. to prevent big changes in the level of GDP c. to allow the government to control its own spending d. to let lawmakers make changes in economic decisions
b
When revenues exceed (are greater than) expenditures, . . . a. there is a budget deficit. b. there is a budget surplus. c. the government has to borrow money at higher interest rates. d. the government has to cut spending.
b
Who issues U.S. paper currency? a. the Treasury Department b. the U.S. Mint c. the district Federal Reserve Banks d. the U.S. bank examiners
c
The federal government's use of taxing and spending to keep the economy stable: a. Treasury bill b. productive capacity c. revenue effect d. fiscal policy
d
What is the main goal of a government's fiscal policy? a. to have a budget surplus b. to have a budget deficit c. to produce a balanced budget d. to maintain a stable economy
d
What monetary policy does the Fed use the most to change the money supply? a. changes in the money creation policy b. changes in the discount rate c. changes in the reserve requirements d. open market operations
d
