Understanding Business Ch-2 PDF

Understanding Business, 12e (Nickels) Chapter 02 Understanding Economics and How It Affects Business 1) America's business success is largely due to an economic and social climate that allows businesses to operate freely. Answer: TRUE 2) Global economics and politics have significant influence on bu...

Understanding Business, 12e (Nickels) Chapter 02 Understanding Economics and How It Affects Business 1) America's business success is largely due to an economic and social climate that allows businesses to operate freely. Answer: TRUE 2) Global economics and politics have significant influence on businesses in the United States. Answer: TRUE 3) The study of how society chooses to employ resources to produce goods and services and to distribute them for consumption among various competing groups and individuals is known as demographics. Answer: FALSE 4) Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals. Answer: TRUE 5) Microeconomics is the economic perspective that looks at the operation of a nation's economy as a whole. Answer: FALSE 6) Microeconomics focuses on the decisions and behavior of people and organizations in particular markets. Answer: TRUE 7) Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available. Answer: FALSE 8) Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources. Answer: TRUE 1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 9) Peace and prosperity will flourish if we can find the one best way to divide existing resources among nations. Answer: FALSE 10) Thomas Malthus believed that overpopulation was a major cause of poverty. Answer: TRUE 11) In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future. Answer: FALSE 12) Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves. Answer: TRUE 13) Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor. Answer: TRUE 14) Adam Smith believed the self-interest of businesspeople would lead them to create needed goods, services, and jobs. Answer: TRUE 15) The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all. Answer: TRUE 16) According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business could control a market for a particular good or service. Answer: FALSE 28) In capitalist countries, the government decides what to produce and how the goods and services will be produced. Answer: FALSE 2 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 29) Capitalism is the foundation of the U.S. economic system. Answer: TRUE 30) State capitalism is the combination of freer markets and some government control. Answer: TRUE 31) The most fundamental of all rights in capitalism is the right to private property. Answer: TRUE 32) Under capitalism, the government prohibits people and businesses from competing with each other. Answer: FALSE 33) A basic right under capitalism is the right of businesses to receive government funding. Answer: FALSE 34) Free-market capitalism has made it more difficult for individuals to gain wealth. Answer: FALSE 35) Due to the fundamental rights afforded to us by a free-market capitalistic system, people are more willing to take calculated risks. Answer: TRUE 36) A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed. Answer: TRUE 37) Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market. Answer: TRUE 38) Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time. Answer: TRUE 3 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 39) At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell. Answer: TRUE 40) If the quantity supplied in a market exceeds the quantity demanded, a shortage will exist. Answer: FALSE 41) If a shortage exists in a market for a good, the price of that good will tend to fall. Answer: FALSE 42) The point of intersection between the supply and demand curves is called the stress point. Answer: FALSE 43) In the long run, the market price tends to adjust toward the equilibrium point. Answer: TRUE 44) Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services. Answer: FALSE 45) One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run. Answer: FALSE 46) In perfect competition, each firm produces a product that is clearly differentiated from the products of other firms in the same market. Answer: FALSE 47) A monopoly occurs when there is a single seller for a product or service. Answer: TRUE 48) Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition. Answer: FALSE 4 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 49) Product differentiation is a key to success in monopolistic competition. Answer: TRUE 50) In the United States, laws prohibit the creation of most types of monopolies. Answer: TRUE 51) One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society. Answer: FALSE 52) The greed of businesspeople represents one of the greatest dangers to the operation of a free market system. Answer: TRUE 66) Socialists believe that the primary economic function of the government is to promote rapid economic growth. Answer: FALSE 67) In socialist economies, the government owns some, if not most, basic businesses such as telecommunications systems and utilities. Answer: TRUE 68) The top tax rate on personal income in most socialist economies is usually lower than the top tax rate on personal income in capitalist economies. Answer: FALSE 69) The major benefit of socialism is that it creates strong incentives to work hard and take the risks associated with starting and operating a business. Answer: FALSE 70) Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system. Answer: TRUE 5 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 71) Workers in socialist countries often get longer vacations and more social benefits than workers in free-market economies. Answer: TRUE 72) Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies. Answer: FALSE 73) One drawback of socialism is that it may result in a reduction in the individual's incentive to work hard. Answer: TRUE 74) Brain drain is the loss of the best and brightest people from their home countries to other countries. Answer: TRUE 75) High tax rates in socialist countries are a major reason these nations have experienced a brain drain. Answer: TRUE 76) Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices. Answer: FALSE 77) One of the benefits of communism is that it allows individuals a great deal of freedom to make their own economic decisions. Answer: FALSE 78) Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production. Answer: TRUE 79) Most communist countries today are suffering from severe economic problems. Answer: TRUE 6 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 85) Socialism and communism are both variations of a free-market economy. Answer: FALSE 86) In free-market economies, the government plays a major role in deciding which goods are produced and who will get them. Answer: FALSE 87) Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism. Answer: TRUE 88) Like most nations, the United States has a mixed economy. Answer: TRUE 89) Most countries throughout the world can be classified as either purely capitalist or purely socialist. Answer: FALSE 90) There is general agreement in the United States on the degree to which the government should be involved in the economy. Answer: FALSE 99) We use indicators such as the gross domestic product (GDP), the interest rate, and the price indexes to measure the health of our economy. Answer: FALSE 100) The total value of a country's output of final goods and services in a given year is known as the gross domestic product (GDP). Answer: TRUE 101) The measurement of total sales volume at all stages of production is called the gross domestic product (GDP). Answer: FALSE 7 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 102) Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country. Answer: FALSE 103) GDP figures do not include the value of illegal activities. Answer: TRUE 104) To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks. Answer: TRUE 105) Frictional unemployment occurs because the economy is experiencing a recession. Answer: FALSE 106) Structural unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills or location of job seekers and the requirements or location of available jobs. Answer: TRUE 107) Inflation refers to a general rise in the prices of goods and services over time. Answer: TRUE 108) Inflation refers to the persistent rise in the purchasing power of money. Answer: FALSE 109) Disinflation refers to a situation in which prices continue to rise, but not at the rate they were rising previously. Answer: TRUE 110) Deflation means prices are declining and is an indication that economic conditions are deteriorating. Answer: TRUE 111) The consumer price index (CPI) measures what is happening to prices at the wholesale level. Answer: FALSE 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 112) The CPI measures the pace of inflation or deflation. Answer: TRUE 113) The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket. Answer: FALSE 114) Some wages, tax brackets, interest rates, and government benefits are based on the CPI. Answer: TRUE 115) Core inflation figures omit healthcare prices, but not energy prices. Answer: FALSE 116) The producer price index measures what is happening to prices at the wholesale level. Answer: TRUE 117) Productivity of workers in the U.S. is helped by the use of better machinery. Answer: TRUE 118) The higher the measurement of productivity, the higher the likely costs of production. Answer: FALSE 119) An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time. Answer: TRUE 120) As productivity increases, the cost of producing goods and services is likely to fall. Answer: TRUE 121) In the service sector of the economy, the influx of machinery such as computers increases output per worker, but does little to improve the quality of services. Answer: FALSE 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 122) An economy is said to be in a recession if GDP declines for two or more consecutive quarters. Answer: TRUE 123) A depression is a severe recession that is often accompanied by deflation. Answer: TRUE 136) Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation. Answer: FALSE 137) Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending. Answer: TRUE 138) When the government attempts to stabilize the economy by changing taxes or government expenditures, it is using fiscal policy. Answer: FALSE 139) The national deficit is the difference between our nation's exports and its imports. Answer: FALSE 140) The size of the national debt increases when the federal government runs a deficit. Answer: TRUE 141) The U.S. national debt equals the sum of government deficits over time,. Answer: TRUE 142) The Federal Reserve Bank is responsible for controlling the money supply. Answer: TRUE 143) Monetary policy is directly under the control of the U.S. Department of the Treasury. Answer: FALSE 10 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 144) One of the major ways the Fed influences economic conditions is through its control of interest rates. Answer: TRUE 159) Economics is the study of how a society ________. A) invests wisely in the stock market. B) employs resources to produce goods and services and distribute them among competing groups and individuals. C) employs statistical techniques to make predictions about the evolution of society over the long run. D) governs itself for the good of its citizens. Answer: B 160) ________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals. A) Economics B) Capitalism C) Marketing D) Socialism Answer: A 161) ________ studies the operation of a nation's economy as a whole. A) Microeconomics B) Socioeconomics C) Econometrics D) Macroeconomics Answer: D 162) ________ looks at the behavior of individual people and organizations in specific markets. A) Macroeconomics B) Finite economics C) Microeconomics D) Nanoeconomics Answer: C 11 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 163) Resource development is A) the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals. B) the study of how to increase the amount of available resources and create conditions that will make better use of these resources. C) the part of economics that looks at the operation of a nation's economy as a whole. D) the part of economics that looks at particular markets. Answer: B 164) The study of how to increase the amount of available resources and create conditions that will make better use of these resources is known as A) human resource management. B) microeconomics. C) econology. D) resource development. Answer: D 165) Economist Thomas Malthus believed that ________ would limit economic progress. A) depletion of gold reserves B) overpopulation C) the tendency of governments to levy high tax rates D) the inability of workers in developed nations to compete against cheap foreign labor Answer: B 166) A key to economic growth and development is to A) locate more deposits of gold and other precious metals. B) emphasize a fair and equitable distribution of income. C) provide people with better education. D) allow government planning to guide the allocation of resources. Answer: C 167) ________ is considered by some to be the father of modern economics. A) John Maynard Keynes B) Adam Smith C) Thomas Piketty D) Thomas Malthus Answer: B 12 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 184) ________ is the name of a free-market economic system in which most of the factors of production and distribution -- such as land, factories, railroads, and stores -- are owned by individuals. A) Socialism B) Capitalism C) Communism D) Marginalism Answer: B 185) Under capitalism, A) most of the means of production and distribution are privately owned and operated for profit. B) the primary function of the government is to distribute wealth more evenly. C) utilities, health care, education, and other important services are operated by the government. D) markets operate to carry out the decisions made by central planners. Answer: A 186) The foundation of the U.S. economic system is based on A) capitalism. B) the ideas of Thomas Malthus. C) equality. D) the saying, "from each according to ability, to each according to need." Answer: A 187) Which of the following is a basic right under capitalism? A) Freedom of collusion B) Freedom from taxation C) The right to vote D) The right to compete Answer: D 188) The freedom of people to decide where they want to work and live, and what they want to buy or sell are basic capitalist rights under A) eminent domain. B) freedom of expression. C) freedom of choice. D) freedom of competition. Answer: C 189) The freedom for people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under A) the right to own private property. 13 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. B) freedom of expression. C) freedom of choice. D) freedom of competition. Answer: A 190) A free market is one in which decisions about what to produce and in what quantities are made by A) the Fed. B) the president. C) the market. D) Congress. Answer: C 191) In a free-market economic system, ________ is the key determinant used to signal to producers what to produce and how much to produce. A) the market curve B) trend C) price D) quantity Answer: C 192) The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the A) supply of that product or service. B) demand for that product or service. C) elasticity of that product or service. D) utility of that product or service. Answer: A 193) A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to A) decrease. B) increase. C) remain constant. D) fluctuate randomly around its equilibrium value. Answer: B 14 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 194) A simple supply curve shows a relationship between the A) amount of labor a firm hires and the amount of output it can produce. B) amount of time required to produce a good and the relevant production costs. C) price of a good and the quantity of that good sellers are willing to offer for sale at a specific point in time. D) amount of a good a firm produces and the amount demanded by consumers. Answer: C 195) A(n) ________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period. A) demand B) supply C) utility D) equilibrium Answer: A 196) A typical demand curve shows that A) as people earn higher wages, they buy more of a specific good. B) as supply increases, the amount purchased decreases. C) people tend to buy more of a good than they really want. D) people tend to buy more of a good when its price decreases. Answer: D 197) When the supply curve and demand curve for a particular good are shown together on a single graph, the point at which the two curves intersect identifies the A) total profit earned by producers. B) total amount of labor that will be employed in that market. C) amount of time it takes to bring together the buyers and sellers of the good. D) equilibrium price of the good. Answer: D 198) When prices are free to adjust over time, in the long run, the market price of a good tends to A) rise above the equilibrium price in the long run. B) equal the equilibrium price. C) fall below the equilibrium price in the long run. D) have no specific relationship to the equilibrium price. Answer: B 15 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 199) If a shortage exists for a good in a free-market economy, the A) price of the good will rise. B) price of the good will fall. C) government will order suppliers to increase the production of that good. D) government must establish a rationing system to make sure that the good is fairly distributed. Answer: A 200) ________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product. A) Oligopoly B) Monopolistic competition C) Perfect competition D) Microeconomic competition Answer: C 201) ________ exists when a large number of firms produce goods that are similar but customers believe there is a difference. A) Perfect competition B) Monopolistic competition C) Oligopoly D) A monopoly Answer: B 202) ________ exists when the entire supply of a good is controlled by a single seller. A) Perfect competition B) Oligopoly C) Pure capitalism D) A monopoly Answer: D 203) An oligopoly is a market that is characterized by A) one seller that totally dominates the supply of the product. B) a large number of small companies all producing very similar products. C) a few large sellers who dominate the market. D) several small firms that compete primarily by differentiating their products. Answer: C 16 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 220) A major premise of a socialist system is A) to make sure that the people who create wealth are allowed to keep that wealth. B) to reduce the inequality in the distribution of wealth. C) to create incentives to encourage entrepreneurs to create jobs and economic growth. D) to keep tax rates extremely low so that businesses do not need to support government projects. Answer: B 221) A major benefit of socialism is the A) ability to stimulate rapid economic growth. B) ability to keep taxes low. C) emphasis on social equality. D) emphasis on private enterprise instead of public ownership. Answer: C 222) Under the ________ system there is very little incentive to work hard or to produce quality goods or services. A) capitalist B) socialist C) communist D) mixed economy Answer: C 223) Brain drain has occurred in many socialistic nations because A) socialism encourages an unequal distribution of income, leaving many without medical and social services. B) the government does little to protect the natural environment. C) workers tend to have to work longer hours and receive fewer benefits under socialism. D) tax rates on well-respected professionals such as doctors tend to be very high. Answer: D 224) Communism is an economic system in which A) the government and private citizens own equal shares of the economic resources. B) almost all of the productive resources are owned by private businesses. C) the government makes almost all of the major economic decisions. D) individual consumers make all economic decisions. Answer: C 17 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 225) In recent years, countries with communist economic and political systems have A) enjoyed periods of great prosperity. B) experienced economic depression. C) placed even more importance on individual ownership of businesses. D) grown very slowly, but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe. Answer: B 226) The economic and political system in which the government owns almost all the major factors of production is called A) communism. B) capitalism. C) ethnocentrism. D) socialism. Answer: A 235) Today, the economic systems of most nations could most accurately be classified as A) pure capitalism. B) pure socialism. C) command economies. D) mixed economies. Answer: D 236) Both socialism and communism are variations of A) command economies. B) competitive economies. C) free-market economies. D) plutocratic systems. Answer: A 237) A major trend around the world today is that A) free-market economies are moving more toward socialism and socialist economies are moving more toward capitalism. B) productivity in the service sector is increasing much more rapidly than productivity in agriculture and manufacturing. C) governments in socialist economies are increasing their use of social programs and relying on higher tax rates to finance these programs. D) governments in countries with capitalist economies are paying less attention to environmental concerns and issues involving social equality. Answer: A 18 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 238) A command economic system is characterized by A) reliance on the forces of supply and demand to determine what is produced. B) reliance on the government to determine what is produced and who gets the output. C) an extremely rapid rate of economic growth. D) freedom of choice and freedom of competition. Answer: B 239) The social and economic goals of ________ include private ownership of land and business. A) capitalism B) socialism C) communism D) a mixed economy Answer: A 247) The U.S. economic system relies on A) the private sector to measure its economic well-being. B) industries that produce capital equipment to determine how well things are going. C) frictional unemployment statistics as the sole measure of economic health. D) key economic indicators such as GDP, to measure economic progress. Answer: D 248) The total value of final goods and services produced within a nation's borders in a given year is known as that nation's A) aggregate production quota. B) aggregate domestic output. C) index of aggregate economic output. D) gross domestic product. Answer: D 249) Three important economic indicators of the United States are the unemployment rate, the price indices, and the A) debt to equity ratio (DER). B) gross resource utilization index (GRUI). C) gross domestic product (GDP). D) gross output (GO). Answer: C 19 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 250) The four basic types of unemployment are frictional, structural, seasonal, and A) cyclical. B) procedural. C) industrial. D) traditional. Answer: A 251) ________ unemployment refers to persons who purposefully quit their jobs and have not yet found a new job. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: A 252) ________ unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: B 253) ________ unemployment refers to loss of jobs due to a recession or a similar downturn in the economy. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: C 254) ________ unemployment results when the demand for labor varies during the year. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: D 20 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 255) The ________ is a statistic used to measure the pace of inflation or deflation. A) consumer price index B) gross domestic product C) index of leading indicators D) index of inflationary trends Answer: A 256) The measure used to report price changes at the wholesale level is the A) gross domestic product (GDP). B) consumer price index (CPI). C) gross output (GO). D) producer price index (PPI). Answer: D 257) ________ refers to a general rise in the price level of goods and services over time. A) Acceleration B) Recession C) Inflation D) Escalation Answer: C 258) ________ is a condition characterized by slowing price increases. A) Deflation B) Disinflation C) Stagflation D) Uniflation Answer: B 259) ________ is a condition in which the average level of prices is actually falling. A) Deflation B) Disinflation C) Stagflation D) Uniflation Answer: A 21 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 260) A ________ is a severe recession that is usually accompanied by deflation. A) stagflation B) retraction C) depression D) dissolution Answer: C 261) In recent years, U.S. manufacturing sector has experienced ________ productivity. A) rising B) relatively stable C) falling slowly D) falling very rapidly Answer: A 277) ________ policy refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending. A) Monetary B) Incomes C) Fiscal D) Cyclical Answer: C 278) Fiscal policy involves increases or decreases in A) the money supply. B) interest rates. C) government spending and taxes. D) exports and imports. Answer: C 279) When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a A) Federal Reserve allowance. B) GDP deflator. C) balance of payments deficit. D) national deficit. Answer: D 22 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 280) When the government runs a continual budget deficit, it increases the A) national debt. B) balance of payments deficit. C) federal capital account. D) money supply. Answer: A 281) In the U.S., the ________ has the role of managing the money supply and interest rates. A) United States Treasury B) Federal Reserve Bank C) State Department D) Federal Deposit Insurance Corporation Answer: B 282) One way to lessen the U.S. government budget deficit is to A) cut spending. B) increase spending. C) call in government savings bonds. D) increase government social programs such as welfare, food stamps, and Medicare. Answer: A 283) Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as ________ policy. A) fiscal B) income C) monetary D) securities Answer: C 284) The Federal Reserve Bank operates A) as a semi-private organization not under the direct control of the government. B) under the direct control of the executive branch of the government. C) under the direction of the Banking Oversight Committee of Congress. D) as a special agency of the U.S. Treasury. Answer: A 23 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.