ECO 372T Wk 5 - Apply: Fiscal and Monetary Policy Homework

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ECO 372T Wk 5 - Apply: Fiscal and Monetary Policy Homework

Payments made by the government that do not require an exchange of economic activity in return are also known as

Multiple Choice

built-in stabilizers.

transfer payments.

government spending.

fiscal multipliers.

Using fiscal policy to stabilize the economy is difficult because

Multiple Choice

the effects of policy changes are known with certainty.

potential income is known.

there are time lags involved in the use of fiscal policy.

the size of the government debt doesn't matter.

One timing problem in using fiscal policy to counter a recession is the "legislative lag" that occurs between the

Multiple Choice

time the need for the fiscal action is recognized and the time that the action is taken.

start of a predicted recession and the actual start of the recession.

time fiscal action is taken and the time that the action has its effect on the economy.

start of the recession and the time it takes to recognize that the recession has started.

When the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to be

Multiple Choice

Suppose the reserve requirement is 10%.

more reserves, thus decreasing the money multiplier and decreasing the money supply.

fewer reserves, thus increasing the money multiplier and increasing the money supply.

more reserves, thus increasing the money multiplier and increasing the money supply.

fewer reserves, thus decreasing the money multiplier and decreasing the money supply.

rarely changes the reserve requirement and does not use the reserve requirement as a major monetary policy tool.

does not have the ability to change the reserve requirement since banks determine the amount of reserves to lend.

needs permission from the president before making changes to the reserve requirement.

changes the reserve requirement frequently in order to make adjustments to the money supply.

The discount rate is the interest _____.

Multiple Choice

yield on long-term government bonds

rate at which the central banks lend to the U.S. Treasury

rate at which the Federal Reserve Banks lend to commercial banks

rate at which commercial banks lend to the public

The purpose of expansionary monetary policy is to increase _____.

Multiple Choice

the inflation rate

the GDP gap

real GDP

interest rates

The interest rate that the Fed charges on loans made directly to banks is called _____.

Multiple Choice

the discount rate

the prime rate

interest on reserves

the federal funds rate

Which of the following statements is true?

Multiple Choice

The federal funds rate is higher than the prime rate.

The federal funds rate and the prime rate are often the same.

The prime rate is higher than the federal funds rate.

The prime rate is often the same as the discount rate.

For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy.

Recognition lag

Legislative lag

Implementation lag

All of these lags

Recognition lag

Legislative lag

Implementation lag

All of these lags

Recognition lag

Legislative lag

Implementation lag

All of these lags