Exam 20: Fiscal Policy and Monetary Policy

The Federal Reserve fears that the United States economy is growing too slowly and is stuck in a recession.To move the economy back to its potential GDP,the most likely policy action for the Fed is to ________ the federal funds and thus ________ .

Needs-tested spending is defined as

An income tax hike

To eliminate a recessionary gap,the government can ________ government expenditures on goods and services or ________ taxes.

If the Fed lowers the federal funds rate,eventually the

During the late 1960s,real GDP increased,unemployment fell,and the inflation rate started to rise.Which would have been the appropriate federal government policy combination to improve economic performance by lowering the inflation rate?

Control of monetary policy rests with

If government expenditure on goods and services increases by $10 billion,then aggregate demand

The Fed raises the federal funds rate.Which of the following changes takes the longest time before it occurs?

The Fed affects aggregate demand through monetary policy by changing

When the government's outlays equal its tax revenue,then the budget

When tax revenue exceed the government's outlays,the budget

Needs-tested spending

The balanced budget multiplier applies when a $50 billion increase in government expenditure is financed by a $50 billion ________ in tax revenue and the balanced budget multiplier shows that in this case there is ________ effect on aggregate demand.

Looking at the supply-side effects on aggregate supply shows that a tax hike on labor income

Needs-tested spending

Because investment,consumption expenditure,and net exports are interest-sensitive components of expenditure,a ________ in the federal funds rate brings ________ in ________.

If the Fed lowers the interest rate,then

Needs-tested spending is best described as

The Fed is concerned about inflation.Its policy will ________ U.S.short-term interest rates and,in the foreign exchange market,lead to the value of the U.S.dollar ________.