If the Level of Government Spending Increases at the Same

question 45

Multiple Choice

If the level of government spending increases at the same time the Fed is pursuing contractionary monetary policy, we know that

• A)incomes will fall.
• B)the interest rate will rise.
• C)incomes will rise.
• D)the interest rate will fall.

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Definitions:

Federal Reserve Banks

The 12 regional banks that, along with the Board of Governors, make up the Federal Reserve System, serving as the central banking system of the United States.

Paper Currency

Money in the form of banknotes, issued by the government or central bank as legal tender.

Unlimited

Having no restrictions or boundaries in quantity or scope.

Fiat Money

Currency that a government has declared to be legal tender, but it is not backed by a physical commodity and derives its value solely from the trust that the currency will be accepted as a form of payment.