This quiz works best with JavaScript enabled. Home > Finance > Economics > Macroeconomics > Monetary And Fiscal Policy > Monetary And Fiscal Policy – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary And Fiscal Policy Quiz 2 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Taxing and Spending are the two things that the Government can do to influence the economy. These influences are known as: A) Expansionary Policy. B) Contractionary Policy. C) Fiscal Policy. D) Monetary Policy. Show Answer Correct Answer: C) Fiscal Policy. 2. The United States Federal income tax is a ..... A) Regressive tax. B) Sales tax. C) Progressive tax. D) Proportional tax. Show Answer Correct Answer: C) Progressive tax. 3. Franklin Roosevelt's New Deal program is an example of the use of ....., A) Keynesian economics. B) Let it happen. C) Supply side economics. D) Adam Smith's theory of the invisible hand. Show Answer Correct Answer: A) Keynesian economics. 4. What is the purpose of monetary policy? A) To regulate foreign trade. B) To change federal income tax levels. C) To change the money supply. D) To increase subsidies to aid businesses. Show Answer Correct Answer: C) To change the money supply. 5. Fiscal Policy is the A) Use of taxing and interest rates to influence the economy. B) Use of money supply and interest rates to influence the economy. C) Use of taxing and govt. spending to influence the economy. D) Use of govt. spending and money supply to influence the economy. Show Answer Correct Answer: C) Use of taxing and govt. spending to influence the economy. 6. All of the followings are jobs of the Federal Reserve: A) To protect the money supply. B) To stop people from counterfeiting money. C) To inflate or deflate the money supply. D) All of the above. Show Answer Correct Answer: D) All of the above. 7. The main holder of UK government bonds is currently A) The Bank of England. B) Insurance companies and pension funds. C) Commercial banks. D) UK households. Show Answer Correct Answer: A) The Bank of England. 8. Which statement explains how the Federal Reserve can control rising inflation? A) It can decrease the reserve requirements so banks will have more in excess reserves to lend out to their customers. B) It can decrease the interest paid on banks' reserves which encourages banks to lend more money to customers. C) It can increase the discount rate, which raises consumer interest rates and discourages customers from borrowing money. D) It can decrease the discount rate, which signals banks to lower their interest rates charged to customers for loans. This leads to encouraging more lending and spending. Show Answer Correct Answer: C) It can increase the discount rate, which raises consumer interest rates and discourages customers from borrowing money. 9. The total value in dollars of all the goods and services sold in a country during a single year is referred to ..... A) Inflation. B) GDP. C) Unemployment. D) CPI. Show Answer Correct Answer: B) GDP. 10. Government policies to try and decrease the output of the economy in times of excessive inflation by increasing taxes or decreasing spending. A) Supply-Side Economics. B) Demand-Side Economics. C) Contractionary Fiscal Policy. D) Expansionary Fiscal Policy. Show Answer Correct Answer: C) Contractionary Fiscal Policy. 11. From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Federal Reserve would most likely A) Increase income tax rates. B) Decrease interest rates. C) Increase interest rates. D) Decrease income tax rates. Show Answer Correct Answer: B) Decrease interest rates. 12. How does monetary policy differ from fiscal policy? A) Monetary policy involves the money supply, while fiscal policy involves government taxing and spending. B) Fiscal policy involves the money supply, while monetary policy involves government taxing and spending decisions. C) Fiscal policy involves specific steps taken at different periods in the economic cycle to carry out monetary policy. D) Monetary policy is controlled by the federal government while fiscal policy is controlled by the Federal Reserve. Show Answer Correct Answer: A) Monetary policy involves the money supply, while fiscal policy involves government taxing and spending. 13. Monetary policy and Fiscal Policy aim to influence A) Aggregate demand (AD). B) Aggregate supply (AS). Show Answer Correct Answer: A) Aggregate demand (AD). 14. Which of the following is true about fiscal policy? A) It uses government spending methods. B) It is maintained through buying and selling government bonds. C) It aims to maintain the money supply. D) It does not use tax rate changes. Show Answer Correct Answer: A) It uses government spending methods. 15. Taxes that have the same percentage regardless of income level A) Progressive. B) Regressive. C) Proportional. D) All of the above. Show Answer Correct Answer: C) Proportional. 16. The current Chair of the Federal Reserve is A) Ben Bernanke. B) Jerome Powell. C) Alan Greenspan. D) Janet Yellen. Show Answer Correct Answer: B) Jerome Powell. 17. Programs, like social security, medicare, and the interest on the national debt, that Congress is required by law to spend our tax dollars on is known as A) Mandatory spending. B) Discretionary spending. C) National debt. D) Fiscal policy. Show Answer Correct Answer: A) Mandatory spending. 18. Defense, Education, Health Care, Welfare, Transportation, and Pension Sending is A) Categories of Discretionary Spending. B) Major SOources of Federal Revenue. C) US Monetary Policy for 2012. D) Federal Expenditures in the US. Show Answer Correct Answer: D) Federal Expenditures in the US. 19. What Monetary Policy tools does the Fed NOT use to manipulate the money supply A) Print more money. B) Open Market Operations. C) Change the prime rate. D) Changing the Reserve Requirement. Show Answer Correct Answer: A) Print more money. 20. If unemployment is increasing and real GDP has slowed down, the President and Congress should A) Use contractionary fiscal policy by decreasing spending. B) Use Expansionary Fiscal Policy by increasing spending. Show Answer Correct Answer: B) Use Expansionary Fiscal Policy by increasing spending. 21. Government policies to try and increase the output of the economy in times of recession/contraction by decreasing taxes or increasing spending. A) Expansionary Fiscal Policy. B) Contractionary Fiscal Policy. C) Demand-Side Economics. D) Supply-Side Economics. Show Answer Correct Answer: A) Expansionary Fiscal Policy. 22. The Fed Board of Governors serve ..... terms. A) 14 year terms. B) Lifetime terms. C) 6 year terms. D) 4 year terms. Show Answer Correct Answer: A) 14 year terms. 23. When Alison, a college math professor, leaves her job at a small rural college and starts looking for a job at large urban university, she is A) Structurally unemployed. B) Cyclical unemployed. C) Season unemployed. D) Frictional unemployed. Show Answer Correct Answer: D) Frictional unemployed. 24. Unemployment is too high. What should the Federal Government do? A) Lower the discount rate. B) Lower government spending. C) Sell Bonds. D) Lower taxes. Show Answer Correct Answer: D) Lower taxes. 25. Your roommate is having trouble grasping how monetary policy works. Which of the following explanations could you use to correctly describe the mechanism by which the Fed can affect the economy through monetary policy? Increasing the money supply A) Lowers the interest rate, and firms increase investment spending. B) Lowers the interest rate, raises the value of the dollar, lowers the prices of exports, and raises net exports. C) Causes people to spend more because they know prices will rise in the future. D) Raises the interest rate and consumers decrease spending on durable goods. Show Answer Correct Answer: A) Lowers the interest rate, and firms increase investment spending. 26. Seth is laid off from work because he is a life guard at the local water park. He is experiencing what kind of unemployment? A) Seasonal. B) Structural. C) Cyclical. D) Frictional. Show Answer Correct Answer: A) Seasonal. 27. If the economy is suffering from inflation, what fiscal policy measure could be taken to help alleviate the problem? A) Increase the reserve requirement. B) Increase money supply. C) Increase taxes. D) Increase government spending. Show Answer Correct Answer: C) Increase taxes. 28. The total amount of money that the government owes A) National debt. B) Budget deficit. C) Treasury bonds. D) Tresaury bills. Show Answer Correct Answer: A) National debt. 29. An increase in government spending on education would ..... economic growth. A) Increase . B) Decrease. Show Answer Correct Answer: A) Increase . 30. Discretionary Fiscal Policy A) Changes in government spending or taxes that destabilize the economy. B) Changes in taxes and government spending made by Congress to stabilize the economy. C) Changes in taxes and transfers that occur as GDP changes. D) Policies that are already in place. Show Answer Correct Answer: B) Changes in taxes and government spending made by Congress to stabilize the economy. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesMonetary And Fiscal Policy Quiz 1Monetary 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 8Monetary And Fiscal Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books