Fiscal Policy Phenomena Flashcard

Front

Identify the type of fiscal policy phenomenon described: The government hires 2000 workers for new infrastructure projects. Over half of the newly hired construction workers, however, were employed in other sectors of the economy and quit their jobs to take this better paying opportunity.

Back

a and c only.

Front

The government increases taxes on corporations. Identify what type of fiscal policy phenomenon is being described.

Back

Contractionary fiscal policy.

Front

During a recession, the government increases spending by $300B, which in turn increases GDP by $350B. Identify what type of fiscal policy phenomenon is being described.

Back

a and d only.

Front

During a recession, the government sends $500 checks to every American family. 70% of American families save the money or use it to pay off their debt. Identify what type of fiscal policy phenomenon is being described.

Back

Contractionary fiscal policy and Crowding out.

Front

Suppose a change in fiscal policy causes the AD curve to shift from AD(1) to AD(2). Which response below would most likely cause that shift? A rise in taxes OR a rise in government spending, A rise in taxes OR a fall in government spending, A fall in taxes OR a rise in government spending, A fall in taxes OR a fall in government spending

Back

A fall in taxes OR a rise in government spending

Front

Suppose there is a negative oil shock and oil prices dramatically increase. What has happened?

Back

The aggregate demand curve shifts left.

Front

When the central bank contracts the money supply in response to expansionary fiscal policy, this is known as:

Back

A monetary offset.

Front

The Federal Reserve is considered a powerful institution because it has the power to: Buy government bonds, act as a lender of last resort, and create money.

Back

Buy government bonds, act as a lender of last resort, and create money.

Front

Which of the following best describes the monetary base? Options: Currency plus reserve deposits., M1 plus M2., Currency plus M1., Reserve deposits plus M1 and M2.

Back

Currency plus reserve deposits.

Front

If the Federal Reserve increases the minimum reserve ratio that private banks are required to hold, what will occur? Options: The banks can make more loans and the money supply decreases. The banks can make more loans and the money supply increases. The banks can make fewer loans and the money supply decreases. The banks can make fewer loans and the money supply increases.

Back

The banks can make fewer loans and the money supply increases.