Basic Economics
Fiscal Policy
International Trade
The Federal Reserve and Monetary Policy
Unemployment
100
Under normal circumstances, when the price of a commodity falls, the quantity demanded will _______________.
increase....... Notwithstanding this assertion, the quantity demanded of an "inferior good" will decrease when the price falls.
100
(Contractionary or Expansionary) policies are used to increase overall demand and GDP.
Expansionary!
100
Why do you need to know the exchange rate when you travel to a foreign country?
The exchange rate is important because other countries do not use the U.S. dollar as their currency. The exchange rate tells you how much your dollars are worth and what your spending power will be.
100
The term used for the actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy.
Monetary policy
100
Unemployment when people take time to find a job.
Frictional unemployment.
200
When a consumer goes to market to purchase a commodity, he or she will purchase the __________ priced commodity, provided the commodities on offer are identical in all other respects.
Lowest.......... Here the catch is that commodities are "identical". Suppose you wanted to purchase a Ford Taurus, then you would obviously purchase it from the dealer who offers you the lowest price. But if you wanted to buy "a car", then things would become complicated, as all "cars" on offer are not similar. For instance, one car may have a larger engine, the other one may be more comfortable to drive, and the third one is more fuel efficient and so on. This adding on of "different" features to the basic product (car in this case), so that consumers will be attracted to purchase that particular product, is called "product differentiation". This is the normal situation we find ourselves in. In such a situation, you purchase the car which suits your particular needs best and is also available at a more economical price. This of course does not apply if you decide to purchase a "status symbol", like a Rolls Royce. In such a case, a higher the price may - up to a point - increase desirability.
200
What is the term for a form of demand-side economics that encourages government action to increase or decrease demand and output.
Keynesian
200
What is a trade deficit?
It occurs when a nation imports more than it exports.
200
Interest rate banks charge each other for loans.
Federal funds rate.
200
Unemployment that occurs when workers skills do not match the jobs that are available.
Structural unemployment
300
When the economic activity in an economy is on the decline, then it is called a _______.
recession........ precedes a depression, and when the recession becomes uncontrollable, it will precipitate into a depression. The global economy has witnessed a recession as recently as the late 1990s. It has not precipitated into a depression, thankfully due to the lessons we have learnt from the Great Depression.
300
Name three economic theories.
Classical Keynesian, and supply-side.
300
Describe 3 arguments in favor of protectionism?
Domestic jobs, encourages the growth of new industries
300
How is money created? **Not by printing
The process by which money enters into circulation.
300
Working at a job for which one is over qualified or working part-time when full time work is desired.
Underemployed
400
What is the single most important factor that makes the markets work?
Money........ Even though Marxists believe that markets don't work (at least in the long run), it appears that they do work indeed. The other wrong answers may also appeal to some as being true, but it's really money, honey. The greatest attribute of money (currency) is that it is universally acceptable medium of exchange. So when you produce a commodity, you sell it in exchange of money and then use the money to buy whatever you want. Imagine a barter economy where you are producing hats and need a horse. Then you have to go around to find a fellow who has a horse and also wants a hat. Such activity is obviously time consuming and hampers economic activity.
400
The idea that everyone one dollar of government spending creates more than one dollar in economic activity.
Multipler Effect.
400
How do nations obtain goods and services for which they lack adequate resources?
Nations acquire necessary goods and services through trade.
400
What is the Money multiplier formula and what is it used for?
Initial cash deposit x 1/RRR= Increase in money supply.
400
Number of people unemployed divided by number of people in the civilian labor force multiplied by 100. For example if the number of people unemployed is 7.7 million and the number of people in the civilian labor force is 148.2 million…then 7.7/148.2=_______. _______x100=_________. Therefore the unemployment rate is _______%
052, 5.2%
500
Since human wants are unlimited and available resources are limited, what will a rational consumer do?
Satisfy the most urgent needs which can be met within his/her income levels.
500
Problems changing spending levels, political pressures, and problems in predicting future economic activity are problems of ________.
Fiscal Policy.
500
Susan grows coffee in a North Dakota greenhouse under sunlamps. Growing coffee this way takes a lot of effort and money. She also grows sunflowers, which are easy to grow in the dry climate in which she lives. In which crop does she have a comparative advantage?
Susan has a comparative advantage with sunflowers, since she can produce them in greater amounts more easily.
500
Through bond sales, the Fed removes reserves from the banking system causing Bonds circulation to increase. With that said banks reduce lending causing the _____________ to decrease.
Money Supply.
500
_________ unemployment occurs during economic downturn.
Cyclical
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