This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Monetary And Fiscal Policy > Monetary And Fiscal Policy – Quiz 18 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary And Fiscal Policy Quiz 18 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. As a result of coronavirus, what did the Fed lower the discount rate to in order to encourage banks, individuals, and businesses to borrow money and stimulate the economy? A) 3%. B) 2%. C) 1%. D) 0%. Show Answer Correct Answer: D) 0%. 2. The leaders of a small country decide that they need to enact contractionary fiscal policy to reduce the inflation rate. Therefore, they decreased spending and increased taxes. How would this action affect the national budget and the national debt? A) National Budget:surplus National Debt:increase. B) National Budget:surplus National Debt:decrease. C) National Budget:deficit National Debt:decrease. D) National Budget:deficit National Debt:increase. Show Answer Correct Answer: D) National Budget:deficit National Debt:increase. 3. It usually takes Congress about 18 months to draft this A) A bill. B) The Federal Budget. C) Articles of Impeachment. D) All of the Above. Show Answer Correct Answer: B) The Federal Budget. 4. Increase in the national debt would be caused by A) Increasing govt. spending and increase taxes. B) Increasing govt. spending and decrease taxes. C) Decreasing govt. spending and increase taxes. D) Increase interest rates and decrease the money supply. Show Answer Correct Answer: B) Increasing govt. spending and decrease taxes. 5. Which of the following describes what the Fed would do to pursue an expansionary monetary policy? A) Use open market operations to buy bonds. B) Use discount policy to raise the discount rate. C) Use open market operations to sell bonds. D) Raise the reserve requirement. Show Answer Correct Answer: A) Use open market operations to buy bonds. 6. The Federal Reserve sells securities/bonds as part of Open Market Operations. What is the result? A) Money supply increases. Aggregate Demand decreases. B) Money supply decreases. Aggregate Demand increases. C) Money supply decreases. Aggregate Demand decreases. D) Money supply increases. Aggregate Demand increases. Show Answer Correct Answer: C) Money supply decreases. Aggregate Demand decreases. 7. If the Federal Reserve decreased reserve requirements, then it is likely trying to accomplish which of the following? A) A decrease in the price level. B) A decrease in aggregate demand. C) An increase in gross domestic product. D) An increase in the unemployment rate. Show Answer Correct Answer: C) An increase in gross domestic product. 8. This group, comprised of seven members, that is in charge of major decisions in the Federal Reserve is known as A) Board of Governors. B) Federal Open Market Committee. C) The Federal Reserve Banker. D) None of the above. Show Answer Correct Answer: A) Board of Governors. 9. Which of the following is an automatic stabilizer? A) Spending on public schools. B) Military spending. C) All of these answers are automatic stabilizers. D) Spending on the space shuttle. E) Unemployment benefits. Show Answer Correct Answer: E) Unemployment benefits. 10. True/False:The higher your property value, the more you pay in taxes which help support the community. A) True. B) False. Show Answer Correct Answer: A) True. 11. If government is trying to promote stability and economy growth through tax cuts, what type of policy are they using? A) Expansionary Fiscal Policy. B) Contractionary/Restrictive Fiscal Policy. C) Easy Money Policy. D) Tight Money Policy. Show Answer Correct Answer: A) Expansionary Fiscal Policy. 12. During a recession the Fed will ..... the money supply by ..... government securities. A) Decrease buying. B) Increase buying. C) Decrease selling. D) Increase selling. Show Answer Correct Answer: B) Increase buying. 13. In what type of business organization is the business a separate unit from the owner(s)? A) Sole proprietorship. B) Partnership. C) Corporation. D) Franchise. Show Answer Correct Answer: C) Corporation. 14. Comparing price tags at different stores is using money as a A) Store of value. B) Bartering. C) Medium of exchange. D) Unit of account. Show Answer Correct Answer: D) Unit of account. 15. Suppose a wave of investor and consumer pessimism in the USA causes a reduction in spending. If the US Federal Reserve (which has a broader remit than the Bank of England which is charged only with controlling inflation) chooses to engage in activist stabilization policy, it should A) Increase government spending and decrease taxes. B) Decrease the money supply. C) Decrease government spending and increase taxes. D) Decrease interest rates. Show Answer Correct Answer: D) Decrease interest rates. 16. An increase in money supply A) Monetary policy. B) Fiscal policy. C) Expansionary monetary policy. D) Contractionary monetary policy. Show Answer Correct Answer: C) Expansionary monetary policy. 17. The inflation target is set by A) The Governor of the Bank of England. B) The Bank of England. C) The MPC of the Bank of England. D) The Government. Show Answer Correct Answer: D) The Government. 18. When the our government spends more than it takes in during a given year we are in A) A budget surplus. B) A budget deficit. C) A neutral budget. D) A trade deficit. Show Answer Correct Answer: B) A budget deficit. 19. If the Federal Reserve is trying to promote economy stability by lowering the Federal Funds rate, what action would Fiscal Policy take? A) Lowering Taxes. B) Increase taxes. C) Decrease spending. D) Decrease borrowing. Show Answer Correct Answer: A) Lowering Taxes. 20. What is the primary reason why the Federal Reserve is an independent body? A) To regulate interest rates. B) To control inflation. C) To encourage full employment. D) To avoid political influence. Show Answer Correct Answer: D) To avoid political influence. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesMonetary And Fiscal Policy Quiz 1Monetary And Fiscal Policy Quiz 2Monetary And Fiscal Policy Quiz 3Monetary And Fiscal Policy Quiz 4Monetary And Fiscal Policy Quiz 5Monetary And Fiscal Policy Quiz 6Monetary And Fiscal Policy Quiz 7Monetary And Fiscal Policy Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books