Fiscal Policy / Automatic Stabilizers
Who typically enacts fiscal policy?
The Government
Name the three main functions of money
1. Medium of Exchange
2. Store of Value
3. Unit of Account
Why do people exchange currency?
To buy goods from other countries
Expansionary fiscal policy shifts the _____
curve to the _____.
Aggregate demand; Right
Who is considered the father of modern economics?
Adam Smith
What is the purpose of automatic stabilizers?
To reduce the severity of business cycles without needing to directly create new laws
When the krona was first introduced in
Sweden, it was directly tied to gold, with each
krona being defined as 0.4 grams of gold.
This is an example of _____ money
Commodity-backed
What causes a currency to appreciate in value?
External parties are buying more goods from the country in which that currency originates.
Which of the following are examples of
contractionary fiscal policy? Select all that
apply.
a. Increasing taxes
b. Increasing government spending
c. Increasing transfer payments
d. Increasing the interest rate
e. (None of the above)
a. Increasing taxes
What is the term for the change in behavior by buyers or sellers in the market in response to a change in price for a good or service?
Elasticity
In 2022, The Swedish government had a
budget surplus. This meant that
government spending was _____ than tax
revenue, and that government debt _____.
Less; decreased
Monetary policy aims to shift money supply to offset sudden shifts of what economic variable?
Aggregate Demand
Prior to November 1992, Sweden had a fixed
exchange rate. When demand for the krona
increased, the Riksbank was forced to _____
krona in order to _____ the krona.
a. Buy; revalue
b. Buy; devalue
c. Sell; revalue
d. Sell; devalue
d. Sell; devalue
Which of the following policies are likely to
result in long-run economic growth for
Sweden? Select all that apply.
a. Continued investment in the education
system.
b. Continued investment in research and
development of new technologies.
c. Expansionary fiscal policy in response
to recessions.
d. Expansionary monetary policy in
response to recessions.
a. Continued investment in the education
system.
b. Continued investment in research and
development of new technologies.
In economics, which term refers to the secretive (and often illegal) practice among companies that would usually be rivals deciding to work together to influence the market in their favor (for example, through price fixing)?
Collusion
Sweden currently has an inflation rate of
6.5%. If the government wished to reduce
the inflation rate, it could
a. Decrease spending.
b. Decrease taxes.
c. Decrease sales of government debt
(bonds or securities). d. Decrease purchases of government
debt (bonds or securities)
d. Decrease purchases of government
debt (bonds or securities)
Sweden currently has an unemployment rate
of 7.4%. If the Riksbank wished to reduce
the unemployment rate, it could
a. Increase unemployment benefits.
b. Increase transfer payments.
c. Increase the policy rate (similar to the
federal funds rate).
d. Increase purchases of government
debt.
d. Increase purchases of government
debt.
When one currency floats freely against another, what happens to the impact of domestic business cycles? Foreign business cycles?
Increased; Decreased
Give me two examples of both expansionary and contractionary policy
(any reasonable answer)
Increasingly popular as a way to attain exposure to a wider array of investments, the financial term ETF most often stands for what three words?
Exchange Traded Fund
During recessionary gaps, automatic
stabilizers automatically put _____ pressure
on inflation and _____ pressure on
unemployment.
a. Upward; upward
b. Upward; downward
c. Downward; upward
d. Downward; downward
b. Upward; downward
Explain the relationship between inflation/money supply and unemployment.
As inflation/money supply rises, unemployment falls and vice versa.
Prior to 2008, Sweden had limited reserves.
During this time, the Riksbank’s primary
policy tool was _____. Sweden now has
ample reserves. As a result, the Riksbank’s
primary policy tool is now _____.
a. Open market operations; open market
operations
b. Open market operations; direct control
of the policy rate
c. Direct control of the policy rate; open
market operations
d. Direct control of the policy rate; direct
control of the policy rate
b. Open market operations; direct control
of the policy rate
Why must fiscal and monetary policy offset demand as opposed to shifting it directly?
Because doing so is impossible. You don't have direct control of the consumer, so all you can do is create incentives through manipulation of supply.
Sequoia and Accel are both financial firms that are considered hallmark members of what sub-class of private equity investing?
Venture Capital