HFA TEST 2 UPDATED ACTUAL Exam
Questions and CORRECT Answers
Dual Mandate of the Federal Reserve - CORRECT ANSWER - maximum employment
and low, stable inflation
monetary policy - CORRECT ANSWER - controlled by the central bank, setting a target
for federal funds rate which affects interest rates, and buying/selling bonds on open market
expansionary monetary policy - CORRECT ANSWER - to get max employment, lowers
interest rates, and purchases bonds
contractionary monetary policy - CORRECT ANSWER - to get low inflation, raises
interest rates, sells bonds
fiscal policy - CORRECT ANSWER - government spending and taxes
expansionary fiscal policy - CORRECT ANSWER - to stimulate economic growth,
lowering taxes, and increasing government spending
contractionary fiscal policy - CORRECT ANSWER - to slow down economic growth,
increasing taxes, and lowering government spending, used to combat inflation and debt
John Maynard Keynes - CORRECT ANSWER - British economist who argued that for a
nation to recovery fully from a depression, the govt had to spend money to encourage investment
and consumption
neoclassical economics - CORRECT ANSWER - (they thought governments should
not take action in response to economic shocks)
Questions and CORRECT Answers
Dual Mandate of the Federal Reserve - CORRECT ANSWER - maximum employment
and low, stable inflation
monetary policy - CORRECT ANSWER - controlled by the central bank, setting a target
for federal funds rate which affects interest rates, and buying/selling bonds on open market
expansionary monetary policy - CORRECT ANSWER - to get max employment, lowers
interest rates, and purchases bonds
contractionary monetary policy - CORRECT ANSWER - to get low inflation, raises
interest rates, sells bonds
fiscal policy - CORRECT ANSWER - government spending and taxes
expansionary fiscal policy - CORRECT ANSWER - to stimulate economic growth,
lowering taxes, and increasing government spending
contractionary fiscal policy - CORRECT ANSWER - to slow down economic growth,
increasing taxes, and lowering government spending, used to combat inflation and debt
John Maynard Keynes - CORRECT ANSWER - British economist who argued that for a
nation to recovery fully from a depression, the govt had to spend money to encourage investment
and consumption
neoclassical economics - CORRECT ANSWER - (they thought governments should
not take action in response to economic shocks)
