Content Statements 20, 21 Quiz

What is the effect when the Federal Reserve increases interest rates?

• The cost of taking out loans increases
• Consumers spend more in the economy
• The government receives a large increase in tax revenue
• Sudden inflation causes the price of goods and services to go up

The government has enacted a law requiring the installation of seat belts in new cars. What is the intended benefit of this type of increased government regulation?

• to increase tax revenue
• to promote economic growth
• to reduce private-sector profits
• to enhance consumer protections

The Federal Reserve purchases and sells government securities, adjusts the reserve requirement, and adjusts the discount rate to produce certain economic outcomes. What is one outcome the Federal Reserve might want to produce when purchasing government securities?

• Increasing interest rates
• reducing the money supply
• fostering economic expansion
• fostering economic contraction

What is one way the Federal Reserve System regulates economic activity

• regulating tariff rates on foreign imports
• regulating production of consumer goods
• regulating the amount of money in circulation
• regulating spending by the federal government

What is one of the Federal Reserve's primary functions in the US economy?

• collecting federal income taxes
• applying import and export tariffs
• maintaining stock market stability
• regulating the nation's money supply

Why might lawmakers increase taxes and decrease government spending?

• To reduce unemployment
• To increase government spending
• To decrease the level of demand
• To encourage corporate spending

Why is it difficult to for the federal government to make large tax cuts?

• Most of the government's costs are for wages for federal employees
• The largest part of government spending is fixed and cannot be easily reduced
• Most people oppose cuts for programs like foreign aid or the state department, which make up the most government spending
• A constitutional amendment has limited the size of any spending cuts that can be passed in congress during any one fiscal year

How does the Federal Reserve foster Economic Contraction? (Select 2)

• Sell Government Securities

• Lower Interest Rates

• Raise Interest Rates

• Buy Government Bonds

How does the Federal Reserve foster Economic Expansion? (Select 2)

• Sell Government Securities

• Lower Interest Rates

• Raise Interest Rates

• Buy Government Bonds

What is a primary responsibility of the Federal Reserve System?

• to ensure the federal government maintains a balanced budget

• to ensure that consumers get the best prices on goods in the marketplace

• to make loans to individuals experiencing financial hardships

• to moderate the impact of expansions and contractions in the economy