Question Details

A major advantage of monetary over fiscal policy is 



1. If in a less-than-fully-employed economy the Fed wanted to reduce interest rates it could do which of the following: (i) buy government bonds on the open market or (ii) bid up the price of treasury bills at the weekly T-bill auction. 
a) (i) or (ii) b) (i) not (ii) c) (ii) not (i) d) neither (i) nor (ii) 
2. An expansionary fiscal policy at less than full employment should 
a) have no effect on the interest rate because the money supply is unchanged 
b) raise the interest rate because higher income increases the demand for money 
c) lower the interest rate because higher income and lower interest rates go together 
d) lower the interest rate because higher income increases investment which is inversely related to the interest rate 
3. The limit of an economy's total productive capacity at any given time is set by 
a) the amount of money in circulation b) business demand for goods and services 
c) the level of government spending and taxation 
d) the quantity and quality of its productive resources 
4. A major advantage of monetary over fiscal policy is that monetary policy 
a) can be put into effect more quickly b) affects all sectors of the economy equally 
c) authorities are quicker to see the need for policy 
d) has a more direct and predictable impact on spending 
5. "Federal Reserve Chairman Alan Greenspan last week told Congress the economy is showing some signs of strain, notably tightness in the labor markets, and said Fed policymakers stood ready to raise or lower interest rates if necessary to maintain the nation's economic expansion." The Fed would likely 
a) lower interest rates if inflation developed 
b) raise interest rates if labor markets became tighter 
c) raise interest rates if labor markets became looser 
d) lower interest rates if labor markets became tighter




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