Monetary Policy
When a recession is starting, the Federal Reserve will ________ interest rates
Lower
If unemployment is too high, what type of fiscal policy should Congress implement?
Expansionary
A tax that takes the same proportion of income/wealth from all citizens can be categorized as a:
Proportional tax
The difference between revenues and spending in a single year is this
Deficit
What terms describes the buying and selling of bonds that is done by the Federal Reserve?
Open Market Operations
What are the three goals of the Federal Reserve?
- Stable economic growth
- Low inflation
- Full employment
Who determines fiscal policy?
Congress & the President
A tax that takes a higher proportion of income/wealth from wealthier individuals can be categorized as a:
Progressive tax
When the federal government has more expenditures (spending) than receipts (revenue) over time, this increases
National debt
Who determines the Federal Funds Rate target range?
The Federal Reserve
What is the fraction of deposits that banks have to hold in reserve (can't lend out)
Reserve requirement
Contractionary fiscal or monetary policy is designed to fix excessive _________
Inflation
A tax that takes a higher proportion of income/wealth from poorer individuals can be categorized as a:
Regressive tax
The name for spending that the government spends every year, without having to include in the budget (e.g. Social Security)
Mandatory spending
The name for money that is made legal tender by government decree (like the US dollar)
Fiat money
What are the 4 tools of the Federal Reserve?
- discount rate
- interest on reserves
- open market operations
- reserve requirements
What are the two tools of fiscal policy?
Taxing and spending
A sales tax that is placed on businesses but passed on to consumers in the form of higher prices can be categorized as an:
Indirect tax
The name for federal spending that is determined by Congress and the President each year as part of the budget process
Discretionary spending
The godfather of classical (laissez-faire) economics, who described the "invisible hand of the free market" in his work The Wealth of Nations.
Adam Smith
What characteristic of the economy is most immediately affected by open market operations (buying and selling bonds)?
The money supply
When the economy is in a recession, what would the government do to tax rates to boost the economy?
Lower
A tax on imports, designed to protect domestic businesses an be categorized as a:
Tariff
The name for benefits that all citizens are entitled to upon reaching a certain age or income bracket
Entitlements
The godfather of modern demand-side economics, who advocated for expansionary and contractionary fiscal policy to stabilize the business cycle.
John Maynard Keynes