Unit 3B Macroeconomics 5Th Period

Front 1

The central bank of the United States that sets policies designed to control the money supply.

Back 1

The Federal Reserve

Front 2

When the Federal Reserve lowers the discount rate, what do banks do?

Back 2

Banks loan more money

Front 3

Why does the Federal Reserve require banks to keep a percentage of their funds as reserves?

Back 3

To supply in case of withdrawals

Front 4

When the Federal Reserve sells government securities on the open market, what effect does this action have on the nation's money supply and aggregate demand?

Back 4

The Money Supply Decreases
Aggregate Demand Decreases

Front 5

What is a monetary policy that might be used to reduce inflation?

Back 5

Open Market Sales
(selling bonds/securities)

Front 6

In which situation might the Federal Reserve buy government securities and lower its discount rate?

Back 6

in a recession

Front 7

The Federal Reserve conducts its business directly with

Back 7

The government and banks

Front 8

The Federal Reserve comes to the conclusion that more money must be pumped into the economy in an effort to stimulate growth. What monetary policy of the open market would result in increasing the money supply?

Back 8

buy securities (bonds)

Front 9

The Federal Reserve System is concerned that the US economy might be on the verge of a deflationary period much like the one suffered by the Japanese. Which actions could the fed take together that will both increase the money supply?

Back 9

Open market purchases (buy bonds)
Decrease the reserve requirement (reserve ratio)

Front 10

What is the Organization of the Federal Reserve? (4 parts---top to bottom)

Back 10

Board of GOVERNORS
Federal Open Market Committee
Regional Federal Reserve Banks
Private Member Banks

Front 11

What organization is primarily responsible for the control of the money supply?

Back 11

The Federal Reserve System

Front 12

How is monetary policy different from fiscal policy?

Back 12

Monetary policy involves the money supply, while fiscal policy involves government taxing and spending decisions.

Front 13

After much debate in Congress, the House and Senate finally pass a bill calling for a 5% tax decrease and a cut in federal funding to education institutions. The president then signs the bill. What is this an example of?

Back 13

The government's fiscal policy

Front 14

If the Federal Government is attempting to expand the economy, a fiscal policy BEST serving this purpose would be

Back 14

decreasing taxes

Front 15

Who is responsible for the control of fiscal policy?

Back 15

Congress and the president

Front 16

Congress approves a budget that allocates how much money will be spent in defense, education, social programs, etc. Their plan also calls for an increase in taxes to help pay for all of these expenses. This plan defines the government's ______________________.

Back 16

Fiscal Policy

Front 17

The federal government is concerned that investment spending has declined and the unemployment rate is on the rise. To offset the economic slowdown, what could the government do?

Back 17

Use fiscal policies to increase spending on new projects and grants

Front 18

What effect does a "tight money" policy have on the reserve requirement (reserve ratio) and the economy's money supply?

Back 18

Raises the reserve requirement (ratio), thereby decreasing the money supply

Front 19

Increasing the reserve requirement (ratio) is likely to have what effect on the money supply?

Back 19

Decrease the money supply

Front 20

During a period of high unemployment, what monetary policy might the Federal Reserve use and why?

Back 20

lower the discount rate, which would increase the money supply, encourage consumer spending, and increase aggregate demand

Front 21

One of the tasks of the Federal Reserve System is making loans to ________________________.

Back 21

Commercial banks

Front 22

The Federal Reserve can best be described as this

Back 22

A bank for banks

Front 23

What are the three tools of monetary policy that can be adopted by the Federal Reserve?

Back 23

Raise or lower the Reserve Requirement (Ratio)
Raise or lower the discount rate
Open market sales (selling bonds/securities)
Open market purchases (buying bonds/securities)

Front 24

When the Federal Reserve buys government securities on the open market, what effect does this action have on the nation's money supply and aggregate demand?

Back 24

Money supply increases
Aggregate Demand Increases

Front 25

Fiscal policy is concerned with what two things?

Back 25

Government spending and taxation

Front 26

The Federal Government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. What fiscal policy might be enacted to reduce inflation?

Back 26

Increasing taxation

Front 27

Increased consumption is a side-effect of what type of money policy by the Federal Reserve?

Back 27

An "easy money" policy

Front 28

The unemployment rate is rising and the GDP is falling---so something needs to be done to stimulate the economy. The federal government wants to attempt to encourage spending by consumers and business. What fiscal policy would best serve these purposes?

Back 28

Decreasing taxes