Monetary & Fiscal Policy Econ.

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what is a main goal of the Federal Reserve in its monetary policy?

regulation of the stock market

the Federal Reserve System controls the size of the

money supply

how might monetary policy be used to combat inflation fears?

the Federal Reserve might raise interest taxes

what would MOST LIKELY happen if the FRS lowered interest taxes?

Unemployment would be reduced in the short run

Which has LEAST LIKELY been the historical goal of the Federal Reserve’s monetary policy?

decreasing the national debt

All of these represent?
– Atlanta
– Boston
– Cleveland
– Dallas

state capitals

How does a monetary policy of low interest rate affect consumers?

it lowers saving rates

Which of these would deter inflation?

a decrease in the price of securities

During a recession, what must happen to interest rates to spur economic growth?


A short-term monetary policy action would MOST LIKELY

lower interest rate

what would be reasonable monetary policy during a period of high inflation?

reduce the money supply

what are the three main characteristics of the Fed that make it unique to all other central bank systems in the world?

-has a lot of independence from political authorities – relies on district banks to carry out banking policies developed on national level -member banks own stock in the Fed Reserve banks their districts

What are the 2 big reasons the Fed puts new money into circulation?

-replace worn out note -increase amount of money

What are the 3 goals of the Fed and monetary policy?

-promote sustainable economic growth -full employment -stable price

By regulating the money supply and the interest rates charged for credit the Fed influences

money supply

A ____-money policy is usually adopted in a time of economic recession


the Fed usually adopts a ______money policy when they begin to fear there is too much money in circulation and it could lead to inflation.


focuses on achieving economic stability and growth by increasing the supply of goods and services throughout the economy

supply-side economics

What is the gov’ts role in the supply-side economics?

limited to providing firms with incentives to increase production

who was leading supporter of supply-side economics in its early yrs?

Jean-Baptiste Say

which president is mostly associated with supply-side economic?

Ronald Reagan

two major assumptions do critics of supply-side economics question?

– economists can predict economic behavior of people -many of the tax cuts are unfair

who is considered the "father" of demand-side economics?

John Maynard Keynes

Keyne’s reason based on his economic observations during the Great Depression?

marketplace forces alone were not enough to increase aggregate demand

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