Question

1.

Deflation is:

Select one:

a. a reduction in the rate of inflation.

b. an increase in prices.

c. a decrease in prices; that is, a negative inflation rate.

d. an increase in the rate of inflation.

2.

Which of the following is true regarding the Federal Reserve

Select one:

a. It is charged with collecting taxes

b. It's board members are elected by the people living in the bank's district

c. They are a branch of the Federal Government under the U.S. treasury

d. The members of the Board of Governors are appointed by the President of the United States

3.

Which of the following would make fiscal policy more effective?

Select one:

a. If there were long time lags.

b. If there was a bigger spending multiplier

c. If there people who receive tax rebates save the money

d. If there was more crowding out

Answer 1

Q1.C. A decrease in prices, that is a negative inflation rate. In economics , deflation is a decrease in the general prices level of goods and services.Deflation occures when the inflation rates falls below 0% i.e a negative inflation rate.

Q2. D.. Federal Reserved is central banking system of USA was established in 1913. The main objectives of Fed Reserve is to maximizing employment, stabilizing prices and moderating long term interest. It is governed by the presidentially appointed Board of Governors.

Q3. D. If there was more crowding out. Fiscal stimulus should be temporary because in the long run , Federal Reserve generally keeps the economy operating close to full employment and full capacity through monetary policy. This means that, most of the time , fiscal policy would not increase output, but instead simply crowd out other economic activity or induce the Federal Reserve to tighten monetary policy in order to keep inflation down.