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Chapter 14: Problem 1

Fiscal and monetary policy have (LO1) a) the same means and ends b) different means and ends c) the same means and different ends d) different means and the same ends

Short Answer

Expert verified
d) different means and the same ends

Step by step solution

01

Understand Fiscal and Monetary Policy

Fiscal policy refers to the use of government spending and taxation to influence a country's economy. The government can increase or decrease its spending, and it can also change the tax rates to either stimulate or slow down economic growth. Monetary policy, on the other hand, is conducted by a country's central bank (such as the Federal Reserve in the United States) and involves the management of the money supply and interest rates. By adjusting these factors, the central bank can control the amount of money circulating in the economy and influence the cost of borrowing.
02

Determine The Means And Ends Of Both Policies

To compare these policies, let's identify their means and ends. Fiscal policy: - Means: Government spending and taxation - Ends: Stabilize the economy, promote economic growth, minimize unemployment, and achieve price stability Monetary policy: - Means: Management of the money supply and interest rates - Ends: Maintain price stability, minimize unemployment, and promote stable economic growth
03

Compare and Choose the Correct Answer

Comparing both policies, we can observe that they have different means: fiscal policy uses government spending and taxation, while monetary policy uses the management of the money supply and interest rates. However, the ends of both policies are rather similar: stabilizing the economy, promoting economic growth, minimizing unemployment, and achieving price stability. So, both policies have different means but aim to achieve the same ends. Therefore, the correct answer is: d) different means and the same ends

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Most popular questions from this chapter

Check clearing is done by \((\mathrm{LOI}, 2)\) a) the bank where a check is deposited b) the bank on which a check is written c) the Federal Reserve System d) the comptroller of the currency

If the cquilibrium rate of interest is 7 percent and market price of a U.S. government bond is \(\$ 1,000\), what is the most likely interest rate and bond price if the Fed increases the money supply by a substantial amount? (1.05) a) 8 percent; 51,100 b) 8 percent; \(S 1,000\) c) 8 percent; 5900 d) 6 percent; 51,100 c) 6 percent; \(\$ 1,000\) f) 6 percent; \(\$ 900\)

Which statement is true? (LO6) a) The Fed is more effective at fighting inflation than fighting recession. b) The Fed is more effective at fighting recession than fighting inflation. c) The Fed is effective at fighting both recession and inflation. d) The Fed is effective at fighting neither inflation nor recession.

Which statement is the most accurate? (LO5) a) The Federal funds rate and the discount rate rise and fall together. b) The prime rate of interest is usually about a half percentage point below the Federal funds rate. c) The Federal funds rate did not change at all during the late \(1990 \mathrm{~s}\). d) The Federal Reserve has little influence on interest rates.

One of the main results of the Depository Institutions Deregulation and Monetary Control Act of 1980 may be to (LO7) a) lessen the number of financial institutions in the United States b) increase the number of financial institutions in the United States c) discourage the formation of big, nationwide, allpurpose financial institutions d) make it easier for the member banks to borrow money from the Federal Reserve District Banks
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