Fiscal Policy

Question 1

Question 2

Revolt · Accepted Answer

little

Question 2

Question 3

Revolt · Accepted Answer

Keynes

Question 3

Use the drop-down menus to complete each sentence. was an economist who led a new school of classical economics. The concept of laissez faire refers to government intervention in the economy. The theory that governments should assist in economic crises through fiscal and monetary policy can be credited to .

Revolt · Accepted Answer

Smith; Selection 1: Smith; Selection 2: little; Selection 3: Keynes

Question 4

Use the drop-down menus to complete each sentence. According to the theories of Friedrich August von Hayek, the economy may be too complicated to think in terms of . Hayek believed that was dangerous and could lead to severe inflation. Milton Friedman supported changes to policy to influence economic growth.

Revolt · Accepted Answer

Selection 1: aggregates; Selection 2: expansionary policy; Selection 3: monetary

Question 5

According to the Fed, what were the major problems during the financial crisis of 2008? Check all that apply.

Revolt · Accepted Answer

The money supply became less liquid.; Lending and credit stopped.; It was difficult for banks to receive the loans needed to have cash required to function.

Question 6

Identify the actions taken by the Fed to assist banks during the financial crisis of 2008. Check all that apply.The Fed implemented new fiscal policy measures to encourage consumer spending.The Fed placed a cap on the cash that individuals could receive from banks at one time.The Fed bought securities to increase the money supply.The Fed lowered interest rates, hoping to increase available credit.The Fed carried out open market operations to stimulate growth.

Revolt · Accepted Answer

The Fed bought securities to increase the money supply.; The Fed lowered interest rates, hoping to increase available credit.; The Fed carried out open market operations to stimulate growth.

Question 7

Use the drop-down menus to complete each sentence. A notable action taken by the Fed during the financial crisis of 2008 was carrying out open market operations, which was intended to lower the . The actions taken by the Fed have immediate positive results, despite the fact that the Federal Funds Rate reached nearly .

Revolt · Accepted Answer

Federal Funds Rate; Selection 1: Federal Funds Rate; Selection 2: did not; Selection 3: 0%

Question 8

Question 18

Revolt · Accepted Answer

did not

Question 9

Question 19

Revolt · Accepted Answer

0%

Question 10

Based on the video, which economic theories were most clearly applied by the Federal Reserve in response to the economic crisis?Describe the connections between the Fed’s actions and the theories of Smith, Keynes, Hayek, or Friedman.

Revolt · Accepted Answer

The Fed’s actions most clearly reflected the ideas of Keynes and Friedman. By cutting interest rates, providing emergency loans, and buying financial assets, the Fed tried to encourage borrowing and spending and support jobs, which is consistent with Keynesian policy. These actions also expanded the supply of money and credit to prevent a financial collapse, reflecting Friedman’s emphasis on avoiding a contraction in the money supply. The response was less consistent with Hayek’s view that markets should be allowed to correct themselves with limited intervention.

Fiscal Policy Answers

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