1. Monetary and Fiscal Policy EOCT Practice
By Jan Calhoun
2009

2. The way the government conducts spending and taxation is called what?
monetary policy
economic policy
free enterprise policy
fiscal policy

3. The way the government chooses to control the money supply is called what?
monetary policy
open market operation
reserve requirement and
discount rate
4.fiscal policy

4. Fiscal policy is MOST influenced by
Congress
The “Fed”
The federal board of
governors
4.Businesses

5. Congress approves a budget that allocates how much money will be spent on defense, education, social programs, etc. Their plan also calls for an increase in taxes to help pay for all the expenses. This plan defines what?
the government’s monetary policy
the government’s fiscal policy
the government’s revenue
the government’s reserve requirement

6. After much debate in Congress, the House and Senate finally pass a bill calling for a 1% tax decrease and a cut in federal funding to artistic institutions. The president then signs the bill. This is an example of the government’s
fiscal policy
monetary policy
open market operations
tight money policy

7. Which of the following is one of the tasks conducted by the Federal Reserve System?
executing fiscal policy
printing money
preparing the budget of the federal government
making loans to commercial banks

8. Due to inflation, the Federal Reserve decides to decrease the money supply. Which one of the following will the Federal Reserve MOST LIKELY do?
Lower the discount rate
Implement an “easy money” policy
Buy bonds
Raise the reserve requirement for banks

9. The Central Bank of the U. S
The Central Bank of the U.S. that sets policies designed to control the money supply is called the
Congressional Bank
Bank of the united States of America
Federal Reserve
Bank of US Governors

10. The Federal Reserve comes to the conclusion that more money must be pumped into the economy in an effort to stimulate economic growth. Which of the following actions could the “Fed” take that would result in increasing the money supply?
raise the discount rate
raise the reserve requirement
sell securities (bonds)
buy securities (bonds)

11. When the Federal Reserve lowers the discount rate
interest rates rise
interest rates fall as well
banks loan less money
people save more

12. What effect does a “tight money” policy have on the reserve requirement and the economy’s money supply?
It raises the reserve requirement, thereby increasing the money supply.
It lowers the reserve requirement, thereby decreasing the money supply.
It raises the reserve requirement, thereby decreasing the money supply.
It lowers the reserve requirement, thereby increasing the money supply.

13. If the Federal Reserve decides to sell bonds, what effect will it have?
It will cause the money supply to decrease and inflation to fall.
It will cause the money supply to increase and employment to rise.
It will guarantee higher taxes.
It will extend stagflation.

14. When the Fed sells securities on the open market, it has which of the following effects?
the money supply increases
taxes increase
money supply decreases
tariffs are put in place

15. The Federal government is concerned that economic growth is too high, that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies might be enacted to reduce inflation?
increasing taxation
open market sales
decreasing taxation
increasing government spending

16. The Federal Reserve can best be described as
1. The most important part of the federal government.
2. The executive branch of government
3. The key actor in setting fiscal policy.
4. A bank for banks.

17. Which of the following is responsible for the monetary policy of the U
Which of the following is responsible for the monetary policy of the U.S.?
Congress
The president
The Senate
The Federal Reserve System

18. If GDP is decreasing and the unemployment rate is increasing, which fiscal policy would the government MOST likely use?
increase taxes
decrease taxes
increase bank reserves
decrease spending

19. If the Federal Reserve decides to sell bonds, what effect will it have?
It will cause the money supply to decrease and inflation to fall.
It will cause the money supply to increase and employment to rise.
It will guarantee higher taxes.
4. It will extend stagflation

20. If the inflation rate is rising too fast, which fiscal policy would make MOST sense?
increase taxes
decrease taxes
increase spending
decrease bank reserves

21. When the Fed sells securities on the open market, it has which of the following effects?
the money supply increases
taxes increase
money supply decreases
tariffs are put in place

22. The Federal government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies might be enacted to reduce inflation?
increasing taxation
open market sales
decreasing taxation
increasing government spending

23. When the Fed sells government securities (bonds) on the open market, what effect does this action have on the economy?
increases money supply; increases consumer demand
increases money supply; reduces inflation risk
decreases money supply; increases consumer demand
decreases money supply; reduces inflation risk

24. Which of the following is a MONETARY policy that might be used to reduce inflation?
Decreasing taxation
Decreasing the discount rate
Open market sales
Increasing government spending