Chapter 15 and 16 economics test
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What would be an example of a contractionary fiscal policy ?
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Increasing taxes and decreased government spending
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Which parts of the federal government put together the federal budget ?
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Congress and the White House
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What would be an example of an expansionary fiscal policy ?
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Tax cuts and increased government spending
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What term describes a budget where revenues exceed expenditures ?
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Budget surplus
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What is the purpose of an expansionary fiscal policy?
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Increase aggregate demand,employment and output
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Why is it difficult for the federal government to increase or decrease spending ?
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Because 2/3 of all government spending is on entitlements which the government cannot easily alter
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What are the major uses of government fiscal policy ?
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are to create stability in the economy,to curb inflation and prevent big changes in the level of the GDP
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What are two major problems associated with a large national debt ?
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It reduces the funds for businesses to invest,the government must pay interest on the bonds that make up the national debt
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What banks must join the Federal Reserve System ?
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All nationally chartered banks
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What does "lender of the last resort" mean with respect to the Federal Reserve ?
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It will lend money to a bank in a financial emergency
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How many Federal Reserve Districts are there ?
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12
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In what ways does the Federal Reserve Bank serve the federal government ?
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It sells government securities
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Who appoints the members of the Board of Governors of the Federal Reserve ?
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The president
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Who issues U.S. Paper currency ?
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The federal reserve
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What is the function of a bank examiner ?
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To make sure banks are obeying laws and regulations
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How does the Fed encourage banks to loan more money ?
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They reduce the cash reserve ratio and interest rates
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How does a bond sale made by the Fed affect the money supply ?
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The sale decreases the money supply
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What monetary policy tool is used most often by the Fed to change the money supply ?
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Open market operations
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What does monetary policy do ?
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The actions the federal reserve takes to influence the level of real GDP and the rate of inflation in the economy
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What actions of the federal government are changed by fiscal policy ?
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Raising or cutting taxes, Spending or saving money
