One of the Advantages of Monetary Policy Over Fiscal Policy

question 21

Multiple Choice

One of the advantages of monetary policy over fiscal policy is that

• A) monetary policy must be approved by Congress, which prevents bad monetary policy from taking effect.
• B) monetary policy does not produce inflation, whereas fiscal policy does.
• C) the Fed can react more quickly than the legislature can.
• D) monetary policy allows the Fed to limit government spending so that government budget deficits are reduced.

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Definitions:

Gold Standard

A monetary system in which the standard unit of currency is based on a fixed quantity of gold, ensuring stability and trust in currency value.

Balance of Trade Deficit

A Balance of Trade Deficit occurs when a country's imports of goods and services exceed its exports, indicating that more money is flowing out of the country to buy foreign goods than is coming in from the sale of domestic goods.

United States

A country in North America consisting of 50 states and a federal district, known for its significant economic and political influence globally.

China

A country in East Asia, the world's most populous nation, known for its significant influence in terms of culture, economy, and politics.