econ test

Inflation impact on purchasing power

Negative effect

Action federal reserve takes to control inflation

Sell government bonds

Key tools setting fiscal policy

Government spending taxation

What role does president play in setting monetary policy

None. Fed sets monetary policy

Measures growth in size of economy

GDP (gross domestic product)

Lowest point in economic contraction

Trough

established the amount that a member bank can loan to it’s customers

Reserve requirement

Inflation rate jumps from 2% to 50%

Sell bonds

Unemployment rate jumps 5% to 20%

Increase spending

Fiscal policy result in economic expansion

Increase government spending and decrease taxes

Who makes fiscal policy

The president and congress

3 tolls for setting monetary policy

Open market operations, discount rate, reserve requirement