SIE Exam Question 509: Answer and Explanation

Question: 509

The government has two tools it can use to try to influence the direction of the economy. They are:

• A. Prime rate policy and fiscal policy.
• B. Fiscal policy and money market policy.
• C. Monetary policy and prime rate policy.
• D. Monetary policy and fiscal policy.

Correct Answer: D

Explanation:

D: The two tools of the government are monetary policy, which is controlled by the Federal Reserve Board and controls the money supply, and fiscal policy, which is determined by the president and Congress and controls government spending and taxation.