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Which of the following is not a tool used by the Federal Reserve?
Fiscal policy is the use of government spending to influence the economy. As such, fiscal policy is outside of the scope of the Federal Reserve's powers - fiscal policy can only be initiated by Congress.
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Which of the following is the most effective fiscal policy if potential GDP exceeds current GDP?
If potential GDP exceeds current GDP, the country is in a recessionary gap. The fiscal policies that are effective in closing a recessionary gap are to increase government spending or to decrease (not increase) taxes.
Note that Federal Reserve operations are monetary, not fiscal, policies.
Compare your answer with the correct one above
Which of the following is not a tool used by the Federal Reserve?
Fiscal policy is the use of government spending to influence the economy. As such, fiscal policy is outside of the scope of the Federal Reserve's powers - fiscal policy can only be initiated by Congress.
Compare your answer with the correct one above
Which of the following is the most effective fiscal policy if potential GDP exceeds current GDP?
If potential GDP exceeds current GDP, the country is in a recessionary gap. The fiscal policies that are effective in closing a recessionary gap are to increase government spending or to decrease (not increase) taxes.
Note that Federal Reserve operations are monetary, not fiscal, policies.
Compare your answer with the correct one above