Fiscal and Monetary Policy Overview

<p>Implementing tax cuts to stimulate spending (A)</p> Signup and view all the answers

<p>Supervising banks and conducting monetary policy (D)</p> Signup and view all the answers

<p>Proportional tax (B)</p> Signup and view all the answers

<p>To maintain economic stability by slowing growth (D)</p> Signup and view all the answers

<p>The severe panic and bank runs of 1907 (C)</p> Signup and view all the answers

<p>They make consumers feel wealthier, stimulating spending. (C)</p> Signup and view all the answers

<p>By raising the discount rate to increase borrowing costs. (D)</p> Signup and view all the answers

<p>It reduces banks' lending capacity. (D)</p> Signup and view all the answers

<p>Additional money is pumped into the economy. (D)</p> Signup and view all the answers

<p>It makes borrowing more affordable for banks. (B)</p> Signup and view all the answers

<p>To reduce inflation by slowing economic growth. (D)</p> Signup and view all the answers

<p>Selling government bonds to reduce money supply. (C)</p> Signup and view all the answers

<p>It leads to reduced borrowing and lower spending. (D)</p> Signup and view all the answers

<p>Banks are required to hold less cash. (B)</p> Signup and view all the answers

<p>Low interest rates that encourage loans and spending. (A)</p> Signup and view all the answers

<p>To stimulate economic growth during a recession (C)</p> Signup and view all the answers

<p>By increasing taxes and decreasing government spending (D)</p> Signup and view all the answers

<p>They increase disposable income and stimulate spending (B)</p> Signup and view all the answers

<p>To boost aggregate demand and economic activity (B)</p> Signup and view all the answers

<p>Contractionary monetary policy (B)</p> Signup and view all the answers

<p>It decreases, reducing the amount banks can lend (A)</p> Signup and view all the answers

<p>It encourages borrowing by making it cheaper (D)</p> Signup and view all the answers

<p>It reduces disposable income and curbs inflation (D)</p> Signup and view all the answers

<p>When inflation is high and the economy is overheating (A)</p> Signup and view all the answers

<p>Decreases to reduce aggregate demand (B)</p> Signup and view all the answers

Built-in mechanisms in tax and spending systems that adjust to economic changes, cushioning recessions and slowing booms without needing government intervention.

A tax system where higher earners pay a larger percentage of their income in taxes.

Government program providing temporary financial support to unemployed workers.

Government actions (changing taxes/spending) to directly affect the economy based on current conditions.

The central bank of the United States, responsible for conducting monetary policy and supervising banks.

US law establishing the Federal Reserve System in 1913.

Actions of a central bank (e.g., The Fed) to control the money supply and affect economic conditions.

A situation where many depositors simultaneously withdraw their money from a bank, leading to the bank's failure.

Government actions to stimulate economic growth during a recession, typically by increasing spending or lowering taxes.

Government actions to slow down a growing economy, usually by decreasing spending or raising taxes.

Monetary policy to stimulate the economy by increasing the money supply, making borrowing cheaper.

Monetary policy to curb inflation by decreasing the money supply, making borrowing more expensive.

A fiscal policy tool used in expansionary policy to increase disposable income and encourage spending.

A fiscal policy tool used in contractionary policy to reduce disposable income and curb inflation.

A fiscal policy tool used in expansionary policy to boost aggregate demand by supporting infrastructure, social programs, etc.

A fiscal policy tool used in contractionary policy to reduce aggregate demand and inflation.

A monetary policy tool used in expansionary policy to make borrowing cheaper, increasing the money supply.

A monetary policy tool used in contractionary policy to reduce the amount banks can lend, decreasing the money supply.

The buying and selling of government bonds by a central bank to control the money supply and influence interest rates.

Buying government bonds injects money into the market, decreasing interest rates and encouraging borrowing and spending, which fuels economic activity.

Selling government bonds removes money from circulation, causing interest rates to rise and slowing borrowing, spending, and economic growth.

The interest rate at which commercial banks can borrow money directly from the central bank.

Lowering the discount rate encourages banks to borrow more, increasing lending and economic activity.

Raising the discount rate makes borrowing more expensive for banks, leading to higher interest rates and a slowdown in lending and economic growth.

The percentage of deposits that commercial banks must hold in reserve, not available for lending.

Raising reserve requirements forces banks to keep more money on hand, reducing their capacity to lend and potentially leading to a decrease in spending and economic activity.

Lower interest rates encourage consumers to spend more and businesses to invest more, as borrowing becomes less expensive.

Higher interest rates discourage consumers from spending and businesses from investing, as borrowing becomes more expensive.