Fiscal And Monetary Policy Quiz
1. The Federal Reserve system plays an important role in:
A. setting fiscal policy
B. setting monetary policy
C. calculating the federal debt
D. deciding tax rates
Answer: Letter B
2. Which of the following might increase business activity during a recession?
A. increasing interest rates
B. increasing reserve requirements
C. decreasing rates of taxation
D. decreasing government spending for public goods and services
Answer: Letter C
3. The Federal Reserve exercises monetary policy when it:
A. influences the money supply
B. supervises loan approvals by banks
C. regulates currency distribution
D. determines which banks can operate
Answer: Letter A
4. Monetary policy affects economic activity by influencing:
A. the size of the money supply
B. the amount of income that goes into savings rather than consumption
C. the size of the federal budget deficit
D. tax rates
Answer: Letter A
5. Fiscal policy includes:
A. controlling production
B. changing the money supply
C. changing tax rates
D. setting price controls
Answer: Letter C
6. The most important function of the Federal Reserve System is:
A. issuing currency
B. controlling the money supply
C. supervising commercial banks
D. lending money to banks
Answer: Letter B
7. To decrease unemployment and increase future economic growth, monetary policy should:
A. lower discount rates, which would encourage business investment
B. raise discount rates, which would encourage people to save and invest
C. lower levels of personal savings to finance present consumption
D. raise levels of personal savings to finance future consumption
Answer: Letter A
8. If the Federal Reserve wants to slow down the economy, it will:
A. lower the reserve requirement
B. raise the discount rate
C. buy government securities
D. refuse to clear checks
Answer: Letter B
9. Which of the following is likely to increase business investment:
A. a decrease in interest rates
B. an increase in taxes
C. a decrease in consumer sales
D. a decrease in government spending
Answer: Letter A
10. When commercial banks increase their loans this usually results in:
A. an increase in the nation’s money supply
B. a decrease in the spending power of consumers and businesses
C. an increase in the government’s control over the economy
D. an increase in national debt
Answer: Letter A