11.3 Economic Policy

Another 32% of government's total tax collections come from excise taxes on goods such as liquor, tobacco, and gasoline, estate and gift taxes, and tariffs.

False

Each year, the President submits a federal budget for approval by the Supreme Court for money to be spent starting in October of that year

False

Monetary policy also can affect the money supply and can be used to stimulate spending or curb inflation.

False

Controlling the money supply is the primary task of the _____.

Federal Reserve System

The powerful arm of government that controls the money supply is the _____, which is headed by the Federal Reserve Board.

Federal Reserve System

_____ refers to the government's ability to raise taxes and spend the money.

Fiscal policy

_____ is a general rise in prices that can be caused by many things such as the increase of money in the circulation.

Inflation

_____ believes that the government should manage the economy.

Keynesian economics

_____ required a free market with little intervention from government.

Laissez-faire policy

_____ is written into law by Congress and is also called "uncontrollables."

Mandatory spending

_____ is the way the government regulates the amount of money in circulation of the nation's economy.

Monetary Policy

_____ is the government's control of the money supply.

Monetary policy

The _____ is when the Fed buys and sells government debt in the form of treasury bills or government bonds.

Open Market Operations

_____ the reserve requirement reduces the amount of money in circulation; _____ it pumps more money in the economy.

Raising; lowering

_____ believes that if you lower taxes of businesses and individuals, the individuals will be able to spend more, the businesses will be able to invest more, and the economy, as a whole, will grow.

Supply side economics

Which one of these is NOT a basic function of the Fed?

The Fed creates laws that controls government spending.

About 40 percent of the government's total tax collections come from income taxes from individuals and businesses.

True

Tax cuts stimulates consumer spending by leaving more money in the hands of American citizens.

True

The government borrows money to finance its expenses, such as when it sells treasury bonds to citizens.

True

The government can curb inflation by cutting government expenditures.

True

The largest amount of money goes to entitlement programs such as Social Security pensions for older Americans, unemployment insurance, Medicare, and federal retirement pensions.

True

The third largest amount -- about 15 percent -- of the government expenditure pays interest on the national debt.

True

Since Reagan, especially during the presidency of George W. Bush, the income tax rates of the highest earners have _____.

fallen

The chair of the Federal Reserve Board is elected by the Board for _____.

four years, and may be reelected

The _____ the rate, the _____ banks will borrow, and the more money goes into circulation.

lower; more

Today, the United States economic policy lies _____.

somewhere in between -- government regulating and sometimes managing, but also allowing a free marker whenever possible

The two boards of the Federal Reserve System are the _____. (Choose two answers.)

- Federal Reserve Board of Governors - Federal Open Market Committee

Examples of mandatory spending are _____. (Choose two answers.)

- Social Security and Medicare - interest payments on federal debts

The amounts of spending in Social Security and Medicare may not decline for three reasons: (Choose three answers.)

- older people tend to vote regularly - people like them - the population is aging

The two primary tasks of the Fed are _____. (Choose two answers.)

- to encourage full employment - to control inflation

The Federal Reserve Board consists of _____.

12 regional banks, which in turn supervise a total of about 5,000 banks across the United States

The Fed is made up of _____ regional banks and _____ boards.

12, 2

The Federal Reserve Board's seven members are appointed by the President and are approved by the Senate for _____.

14-year, nonrenewable terms

The percentage of revenue that the government received from taxes has held steadily between _____.

43% and 50%

The most important way that the Federal Reserve Board controls the money supply is by _____.

adjusting interest rates

The _____ is the amount of money in cash that a bank has to have on hand.

bank reserve requirement

The largest chunk of discretionary spending goes to _____.

defense

Open Market Operations

out of; more

If too much money is out there in circulation, it tends to cause inflation, or the devaluation of the dollar; but if there is too little money, this will cause deflation that can lead to a _____.

recession

Low interest rates can cause inflation and reduce _____.

unemployment