Question 1

Which of the following is not an illustration of fiscal expansionary policy?

1. A temporary reduction in payroll tax rates (similar to the reduction in the social security tax rate during the last recession).
2. An extention in the amount of time individuals receive unemployment benefits.
3. A rise in the income tax rate.

Question 2

When government borrowing leads to higher interest rates, which can in turn reduce private investment, this is referred to as

1. the indirect crowding-out
2. the direct crowding-out
3. open economy effect
4. none of the above

Question 3

Which of the following can be considered as an automatic fiscal stabilizer?

1. proportional income taxation
2. regressive income taxation
3. progressive income taxation
4. none of the above

Question 4

To run an expansionary monetary policy, the Federal Reserve needs to

1. Sell bonds
2. Purchase bonds

Question 5

Inflation is likely to undermine which property of money?

1. Unit of account
2. Store of value
3. Medium of exchange
4. None of the above

Question 6

Contractionary monetary policy will likely reduce the central bank's balance sheet (assuming OMO as the policy tool)

1. True
2. False

Question 7

To reduce the Federal Funds rate the Federal Reserve would need to

1. Purchase bonds
2. Sell bonds
3. Increase the reserve requirements ratio
4. None of the above