ECON 705 Module 7 Exam Questions and Correct Answers Latest Update 2025 (Already Passed)
Fiscal Policy - Answers spending and taxes exercised by Government
Expansionary - Answers increase money supply and amount of money available, too much money leads
to inflation, buying bonds
Contractionary Monetary Policy - Answers take away money to manage inflation, to take money out of
the system, selling bonds
Federal Reserve - Answers monetary authority, controls the money supply to increase or decrease, can
be the lender of last resort
Federal Funds rate - Answers the interest rates that banks get loans from each other overnight,
interbank overnight charge
The dual mandate of the Fed - Answers maximum employment and price stability (keep inflation in
check)
Federal Open Market Committee - Answers most powerful committee, 7 board of Governors and 5 other
committee members, make the decisions
Inflation - Answers an increase in the general price level of the economy
Money Supply - Answers if there is so much money in the economy, the price level rises
Discount rate - Answers the interest rate that the Fed charges other bank, higher than Fed Funds Rate,
Open Market Operation - Answers best way to manage money supply, buying and selling government
bonds, to increase the money supply, increase money supply (buy bonds), decrease money supply (sell
bonds)
When doing a combined bundle price, - Answers the bundle price should not be higher than the
combined willingness to pay for each product for each customer. It may be equal to combined total
willingness to pay, but not more.
Fiscal Policy - Answers spending and taxes exercised by Government
Expansionary - Answers increase money supply and amount of money available, too much money leads
to inflation, buying bonds
Contractionary Monetary Policy - Answers take away money to manage inflation, to take money out of
the system, selling bonds
Federal Reserve - Answers monetary authority, controls the money supply to increase or decrease, can
be the lender of last resort
Federal Funds rate - Answers the interest rates that banks get loans from each other overnight,
interbank overnight charge
The dual mandate of the Fed - Answers maximum employment and price stability (keep inflation in
check)
Federal Open Market Committee - Answers most powerful committee, 7 board of Governors and 5 other
committee members, make the decisions
Inflation - Answers an increase in the general price level of the economy
Money Supply - Answers if there is so much money in the economy, the price level rises
Discount rate - Answers the interest rate that the Fed charges other bank, higher than Fed Funds Rate,
Open Market Operation - Answers best way to manage money supply, buying and selling government
bonds, to increase the money supply, increase money supply (buy bonds), decrease money supply (sell
bonds)
When doing a combined bundle price, - Answers the bundle price should not be higher than the
combined willingness to pay for each product for each customer. It may be equal to combined total
willingness to pay, but not more.
