Download Monetary and Fiscal Policy Worksheet 4

Monetary and Fiscal Policy Worksheet 4
Name__________
As you read each situation, answer the following questions
A. Is the problem Inflation, Recession, Stagnant Economy or Unemployment ( list the
type)?
B. Should money be increased (inc)? Should money be decreased (dec)? Or should
neither (ne) be done?
C. Government Action – write number(s) of the specific policy (ies) that should be used
to address the problem?
1. increase taxes
8. decrease taxes
2. increase govt. spending
9. decrease govt. spending
3. job training programs
10. job information
4. decrease discount rate
11. increase discount rate
5. decrease the reserve rate
12. increase the reserve rate
6. sell govt. bonds
13. buy govt. bonds
7. no action
1. A general decline for consumer goods around the country has caused many
manufactures to lay off workers.
A._____________ B_______ C_____________________________________________
2. Prices in general have gone up by over 9% since last summer.
A._____________ B_______ C_____________________________________________
3. Because of a drop in demand for home computers over the last few months, many
computer manufacturers have laid off workers.
A._____________ B_______ C_____________________________________________
4. Prices for new homes and cars have gone up so fast over the last three years that most
consumers can not afford to buy either.
A._____________ B_______ C_____________________________________________
5. Because of increased consumer demand for consumer products over the last six
months, prices have gone up by 6% over the last three months.
A._____________ B_______ C_____________________________________________
6. In the last 10 months sales of most consumer goods have decreased, causing store
owners to layoff workers.
A._____________ B_______ C_____________________________________________
7. Hand made tools are a thing of the past, over the last 10 years, tool manufacturers have
replaced workers with machines.
A._____________ B_______ C_____________________________________________
8. Because consumers are expecting prices on most major consumer items to go up next
year they decide to purchase these items in advance of the price increase. Because of the
change in buying patterns, most items go up in price earlier than expected.
A._____________ B_______ C_____________________________________________
9. Most all people are employed and are buying very expensive cars. Many dealers have
discovered that they can charge higher prices..
A._____________ B_______ C_____________________________________________
10. By late 2007 a recession began, during this time orders for products fell.
A._____________ B_______ C_____________________________________________
11. In the 1930’s the U.S. was in a deep depression. Many people were looking for work.
A._____________ B_______ C______________________________________________
For Questions 12- 17 Answer either Classical, Demand-Side or Supply Side
12. Ronald Reagan was President when this economic theory was attempted?
13. This school of thought on fiscal policies believed that the government should become
the most involved in the economy.
14. Adam Smith was the leading writer on this economic theory on fiscal policy.
15. This fiscal policy theory believes that tax cuts will stimulate the economy.
16. This economic theory believes that the government should not be involved in the
economy.
17. This economic theories leading writer was John Maynard Keynes and the theory can
also be called Keynesian theory.
Inflation
18. Which type of inflation involves the price of production going up causing a rise in
prices?
19. Which type of inflation involves an increase in the number of people wanting
products causing an increase in inflation?
Also on the test questions about the Federal Reserve, business cycle, budget, and
unemployment