GDP measures:

Reserve requirements refer to:

Expansionary fiscal policy involves:

When the Central bank conducts expansionary monetary policy, it typically:

The Central Bank's primary tool for conducting monetary policy is:

The Federal Reserve is considering its policy options. Current economic conditions:

• Unemployment rate: 8%
• Inflation rate: 1%
• Federal funds rate: 2%
• GDP growth: -1%

a) Should the Fed adopt a dovish or hawkish stance? Explain your reasoning. (6 points)

Policy stance: __________________________________________________________

Reasoning: ____________________________________________________________

b) What specific monetary policy tools should the Fed use? List three and explain how each would help. (6 points)

Tool 1: ________________________________________________________________

How it helps: __________________________________________________________

Tool 2: ________________________________________________________________

How it helps: __________________________________________________________

Tool 3: ________________________________________________________________

How it helps: __________________________________________________________

The government of Econoland is considering two fiscal policy options to combat a recession:

Option A: Increase government spending on infrastructure by $100 billion 

Option B: Cut personal income taxes by $100 billion

a) Which option represents expansionary fiscal policy? Explain why both or neither qualify. (6 points)_

b) For each option, explain how it would help stimulate the economy during a recession. (6 points)

c) Which option would you recommend and why? Consider political and economic factors. (4 points)

If the central bank wants to increase the money supply through open market operations, what does it do?

If the Central bank wants to combat high inflation, it should adopt a _______ policy stance:

Explain the difference between "government spending" and "transfer payments" in fiscal policy.