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Download File - Mr. Kleinheksel- Grandville High School Economics
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APEcon 12-13 Name:_____________________________ Combining Fiscal and Monetary Policies- Answers Policy Combination Effects- Expansionary Fiscal and Expansionary Monetary Policy Fiscal: Monetary: Overall Economic Impact: Action Increase Spending BUY BONDS Output Increase Price Level Increase Interest Rate Increase Unemployment Decrease Increase Increase Decrease Decrease XXXXXXXX Increase Increase INDETERMINATE Decrease Policy Combination Effects- Contractionary Fiscal and Contractionary Monetary Policy Fiscal: Monetary: Overall Economic Impact: Action Increase Taxes SELL BONDS Output Decrease Price Level Decrease Interest Rate Decrease Unemployment Increase Decrease Decrease Increase Increase XXXXXXXX Decrease Decrease INDETERMINATE Decrease Policy Combination Effects- Contractionary Fiscal and Expansionary Monetary Policy Action Output Price Level Fiscal: Decrease Spending BUY BONDS Decrease Increase XXXXXXXX INDETERMINATE INDETERMINATE Decrease Monetary: Overall Economic Impact: Unemployment Decrease Interest Rate Decrease Increase Decrease Decrease Increase INDETERMINATE Policy Combination Effects- Expansionary Fiscal and Contractionary Monetary Policy Action Output Price Level Fiscal: Increase Spending SELL BONDS Increase Decrease Monetary: Unemployment Increase Interest Rate Increase Decrease Increase Increase Decrease APEcon 12-13 Name:_____________________________ Overall Economic Impact: XXXXXXXX INDETERMINATE INDETERMINATE Increase INDETERMINATE Policy Combination Questions 1) Which of the following combinations would be recommended for an economy experiencing an annual rate of inflation of 7% and an unemployment rate of 4%? a. increase government spending and increase the reserve requirement b. decrease government spending and decrease the discount rate *c. increase income tax rates and sell bonds d. decrease income tax rates and sell bonds e. increase income taxes and buy bonds 2) If the government and the Federal Reserve both attempt to expand the economy, which of the following describes the probable results of these actions? (FP = Fiscal Policy, MP = Monetary Policy) a. b. *c. d. e. Interest Rates FP MP increase increase decrease decrease increase decrease decrease increase decrease increase Price Level FP MP increaseI ncrease decrease decrease increase increase decrease decrease decrease increase Output FP increase decrease increase decrease decrease MP increase decrease increase decrease increase 3) Economic growth is reduced the most by which of the following combinations of events? a. high interest rates, high savings rate, high business confidence b. low interest rates, low savings rate, high business confidence *c. high interest rates, low savings rate, low business confidence d. low interest rates, low savings rate, low business confidence e. high interest rates, high savings rate, low business confidence 4) Which of the following events combined would result in the most expansionary effect on an economy? *a. decreased taxes, increased government spending, increased net exports, decreased reserve requirements b. increased taxes, increased government spending, increased net exports, decreased reserve requirements c. decreased taxes, increased government spending, decreased net exports, decreased reserve requirements d. decreased taxes, decreased government spending, decreased net exports, decreased reserve requirements e. increased taxes, decreased government spending, decreased net exports, increased reserve requirements 5) Which of the following combinations would be recommended for an economy experiencing an annual rate of inflation of 2% and an unemployment rate of 7%? a. decrease government spending and increase the reserve requirement b. decrease government spending and decrease the discount rate c. increase government spending and sell bonds *d. increase government spending and buy bonds e. increase income taxes and buy bonds 6) If the federal government and the Federal Reserve both attempt to expand the economy, which of the following sets correctly describes the probable results of these actions? (FP=fiscal policy, MP=monetary policy) Interest rates Price Level Output FP MP FP MP FP MP a. increase increase increase increase increase increase b. decrease decrease decrease decrease decrease decrease APEcon 12-13 *c. d. e. Name:_____________________________ increase decrease decrease decrease increase increase increase decrease decrease increase decrease increase increase decrease decrease increase decrease increase
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