Final

Question 1

Fiscal Policy vs Monetary Policy

Answer 1

Fiscal Policy - Changes in government spending, or taxes, to stimulate or slow down the economy (218)

Monetary Policy - influencing economy through changes in banking system’s reserves to influence money supply and credit availability (290)

Question 2

Expansionary Fiscal Policy

Answer 2

Increase deficit => decrease taxes, increase government spending

Shift’s AD curve to right

Question 3

Contractionary Fiscal Policy

Answer 3

Decrease deficit => increase taxes, decrease government spending

Shift’s AD curve to left

Question 4

simple money multiplier

Answer 4

(268) how much money is created from deposits

1/r

ie, 1/.2 = 5

Question 5

discount rate

Answer 5

rate of interest Fed charges for loans to banks