Unit 5 Fiscal & Monetary policy review

Fiscal policy

100

Spending on highway construction, the environment, or education is what type of spending? 

Discretionary spending

200

What type of Fiscal policy is used to slow down the economy and fight inflation?

Contractionary fiscal policy

300

What type of fiscal policy is needed and why?

Real GDP - 2.5%

CPI - 2%

Unemployment - 7.2%.

Expansionary- Unemployment is too high

400

If the government wants expansionary fiscal policy, what should it do to taxes and spending?

Decrease taxes, Increase spending

500

What are the four limitations to Fiscal policy? (Can get partial credit)

Policy lags

Timing issues

Rational expectations theory

Political/Regional issues

Monetary policy

100

Lowering interest rates makes borrowing more or less expensive?

LESS expensive

200

Buying bonds is an example of what type of monetary policy?

Expansionary monetary policy

300

All member banks must hold a percent of their reserves with the Fed. What is this called? What percent do they hold?

Reserve Requirement Ratio (RRR)

10%

400

Unemployment went up from 4.3% to 7.1% over the last 3 months. What monetary policy is needed and what will happen to the RRR, DR, FFR, and OMO

Expansionary. RRR Decrease, DR Decrease, FFR Decrease. OMO- Buy bonds

500

List FOUR Contractionary tools the Federal Reserve can do and what would happen to each

Increase Reserve requirement

Sell bonds

Increase discount rate

Increase Federal funds rate

Taxing

100

Driving on the highway and paying a toll, or a fee for a drivers license is an example of what principle of taxation?

Benefits received 

200

If I said that everyone pays 4.95% for income tax, then what type of tax would this be? 

Proportional tax

300

A sales tax is an example of what type of tax?

Regressive tax

400

What type of tax is the majority of the revenue that the federal government collects?

Individual income taxes

500

Income    Tax Rate

$0 - $10,000    0%

$10,001 - $40,000    10%

$40,001 - $90,000    20%

$90,001 and above   30%

The tax described in the table to the above is what type of tax?

Progressive income tax

Key terms

100

What is it called when the government spends more than it takes in?

Budget deficit

200

Social security and Medicare are examples of what type of spending?

Mandatory spending

300

The interest rate that the banks charge when it lends money to other banks for short-term (overnight) loans is the

Federal Funds Rate (FFR)

400

Fiscal policy features like public transfer programs and a progressive income taxes that work to stabilize the economy. What is this called?

Automatic stabilizers

500

Buying and selling of US securities (bonds.) Most often used tool by the Fed. 

Open Market Operations (OMO)

Food

100

These vegetables are stored in vinegar and other spices in order to make pickles

Cucumbers

200

What is the most widely eaten MEAT in the world?

Pork

300

What is the HOTTEST pepper in the world? 

Carolina Reaper or Chili Pepper X

400

What are the two national dishes of Germany?

 schnitzel and sauerkraut

500

A turtle candy is commonly made out of which three ingredients

Carmel, Chocolate, Pecans