Problem : What are the tools of monetary policy?The tools of monetary policy used by the Fed include open market operations, the reserve requirement, and the federal funds interest rate.
Problem : What are the tools of fiscal policy?The tools of fiscal policy used by the government include taxing and spending.
Problem : How does active policy differ from passive policy?Active policy allows the details of monetary policy and fiscal policy to be at the discretion of policymakers, while passive policy allows the details of monetary policy and fiscal policy to be set by rules.
Problem : What are three problems with active policy?Three problems with active policy are discretion of policymakers, character of policymakers, and short-term vs. long-term goals.
Problem : What are two problems with passive policy?Two problems with passive policy are the discretion of rule makers and the judgment of rule makers.