The Difference Between Fiscal and Monetary Policy

The video tutorial explains the concerns of high unemployment and inflation, and how governments use fiscal and monetary policies to address these issues. Fiscal policy involves government spending and taxation, with tools like the multiplier effect to influence economic output. Expansionary and contractionary policies are used to manage economic growth and inflation. Monetary policy, managed by central banks, involves money supply and interest rates, with tools like reserve ratios and open market operations. Both policies aim to maintain low unemployment and curb inflation for steady economic growth.

What is the primary goal of fiscal policy?

• To influence economic growth through government spending and taxation

• To manage the money supply

• To control the stock market

• To regulate interest rates

Which of the following is an example of expansionary fiscal policy?

• Increasing interest rates

• Raising taxes

• Increasing government spending

• Lowering government spending

What economic theory did Milton Friedman support?

• Keynesian economics

• Supply-side economics

• Monetarism

• Classical economics

How do banks create money?

• By lending out deposits

• By minting coins

• By printing new currency

• By issuing government bonds

What is the required reserve ratio?

• The percentage of deposits banks must keep in reserve

• The interest rate set by the central bank

• The total money supply in the economy

• The amount of money banks can lend out

What is the role of the Federal Reserve in the U.S. economy?

• To manage the money supply and interest rates

• To print money

• To regulate the stock market

• To set tax rates

What is an open market operation?

• The process of printing new money

• The buying and selling of government securities

• The setting of tax rates

• The regulation of the stock market