Chapter 1

Question 1

is the means by which a government adjusts its levels of spending in order to monitor and influence a nation’s economy.

Answer 1

Fiscal Policy

Question 2

It is the sister strategy to monetary policy with which a central bank influences a nation’s money supply.

Answer 2

Fiscal Policy

Question 3

two policies that are used in various combinations in an effort to direct a country’s economic goals.

Answer 3

Fiscal Policy
Monetary Policy

Question 4

it is the government’s approach to the economy before the Great Depression in the United States

Answer 4

Laissez Faire

Question 5

British economist, Fiscal Policy is based on his theories

Answer 5

John Maynard Keynes

Question 6

this theory basically states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending

Answer 6

Keynesian economics

Question 7

an increase in the supply of money followed by an increase in consumer demand can result in a decrease in the value of money

Answer 7

Inflation

Question 8

pumping money into the economy is known as

Answer 8

Pump priming

Question 9

When inflation is too strong, the economy may need a slowdown.

Answer 9

True

Question 10

a government can use this policy to increase taxes in order to suck money out of the economy.

Answer 10

Fiscal Policy

Question 11

Fiscal policy could also dictate a decrease in government spending and thereby decrease the money in circulation.

Answer 11

True

Question 12

typically implemented by a central bank

Answer 12

Monetary Policy

Question 13

decisions are set by the national government

Answer 13

Fiscal Policy

Question 14

is expected to improve the economy’s rate of growth of output (measured by Gross Domestic Product or GDP) in the quarters ahead

Answer 14

Stimulative Monetary Policy

Question 15

is designed to slow the economy in the future to offset inflationary pressures

Answer 15

Tight or restrictive monetary policy

Question 16

is changes in the taxing and spending of the federal government for purposes of expanding or contracting the level of aggregate demand.

Answer 16

Fiscal policy

Question 17

involves lowering taxes and increasing government spending.

Answer 17

Expansionary fiscal policy

Question 18

requires higher taxes and reduced spending.

Answer 18

Contractionary fiscal policy

Question 19

According to Keynes, a recession requires

Answer 19

Deficit spending

Question 20

According to Keynes, an overheated expansion requires a

Answer 20

Budget surplus

Question 21

The first way this can be done is through the federal budget process.

Answer 21

Discretionary Fiscal Policy

Question 22

A second type of fiscal policy is built into the structure of federal taxes and spending.

Answer 22

Automatic Stabilizers

Question 23

Automatic stabilizers referred to as

Answer 23

Nondiscretionary fiscal policy

Question 24

The major source of federal revenue

Answer 24

Progressive income tax