Fiscal Policy
Which economic philosopher is most associated with Fiscal Policy?
John Maynard Keynes
What is the simplest way to describe the FED?
Central Banking system for the United States/Government.
Who conducts Monetary Policy?
The FED
During an Expansion/Peak phase of the business cycle, what type of Fiscal/Monetary Policy needs to be used?
Contractionary
What is a foreign exchange rate?
The value of a currency stated in another currency
Who conducts Fiscal Policy?
The Government (President + Congress)
Who is the chairman of the Board of the FED?
Kevin Warsh
What does the FED do with RR and DR in order to increase the money supply?
Decrease RR and DR
If the government is increasing taxes, what is the FED likely doing with Reserve Requirements?
Increasing
What is currency appreciation?
An increase in the value of a currency
What are the two tools of the Government in Fiscal Policy?
Taxes and Government Spending
How many Federal Reserve Banks are there?
12
What does a Contractionary Monetary Policy look like?
Increase the RR, increase the DR, Sell Bonds
If the unemployment rate is very high, what type of Fiscal/Monetary Policy should be applied?
Expansionary
If a currency depreciates, what will happen to imports?
They become more expensive
What does the government do when they are applying an Expansionary Fiscal Policy?
Decrease Taxes, Increase Spending
Reserve Requirements
Discount Rate
Open Market Operations
Would the FED Buy, or Sell Bonds during a Contraction?
Buy
If GDP is going down, what should the Government do with their spending?
Spend more/Increase
You are visiting South Africa and want to purchase a souvenir that costs 425 Rand. The current exchange rate is $1 = 17 Rand. How much does the souvenir cost in USD$?
425 x (1/17)= $25
What is the purpose of a Contractionary Fiscal Policy?
What is is the main focus of the FED?
Controlling the nation's money supply through the cost/availability of credit.
What would the FED do with taxes during a Recession?
Trick question! NOTHING
Taxes are a Government tool for Fiscal Policy, the FED doesn't control them and they have nothing to do with Monetary Policy. Remember that.
If inflation is high, and unemployment is low, what should the FED do with Reserve Requirements?
Increase
You have $250 and want to know how much spending money you would have in terms of Yen on your trip to Japan. Assuming the exchange rate is $1=163 Yen, how much Yen will you have?
163 x 250 = 40,750 Yen