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AS/AD
Basic Econ Concepts
Fiscal Policy
GDP/Unemployment
Inflation
100

Suppose countries Alphania and Betania produce electronics and apparel using identical resources. Which of the following is true if Alphania exports electronics to and imports apparel from Betania within a free-trade system ?

a) The opportunity cost of producing electronics is higher in Alphania than in Betania.

b) Betania has a comparative advantage in producing apparel, and Alphania has a comparative advantage in producing electronics.

c) Alphania must be specializing in apparel, while Betania is specializing in electronics.

d) Workers in Alphania can produce more apparel per hour than workers in Betania.

e) Consumers in Betania buy more electronics than consumers in Alphania.

b) Betania has a comparative advantage in producing apparel, and Alphania has a comparative advantage in producing electronics.

100

1/reserve requirement

What is the money multiplier

100
MPC/MPS
What is the tax multiplier
100
Represents the supply curve in the market for loanable funds
What is national savings
100
Summary of the country's transactions with other countries.
What is the balance of payments
200
Aggregate output is above potential output.
What is an inflationary gap
200
Interest rate the FED charges on loans to member banks.
What is the discount rate
200
Fraction of an additional dollar of disposable income that is saved is ....
What is Marginal Propensity to Save
200
Profit earned on an investment expressed as a percentage of its cost.
What is the rate of return
200
When one currency is able to buy more of a foreign currency.
What is Appreciation
300
Percentage difference between actual aggregate output and potential output.
What is an output gap
300
The purchase or sale of government debt by the Fed is called an...
What is Open Market Operation
300
MPC is 0.8 and government increases taxes by $50 million. What will occur to Real GDP?
What is decrease by 200 million.
300
Nominal Interest Rate - Inflation Rate
What is the Real Interest Rate
300
Prices at which currencies trade are known as
What is the exchange rate
400

Imagine the aggregate demand curve is in equilibrium above LRAS and the government does nothing. In the long run, what will happen and why?

What is self correcting back to LRAS because supply shifts to the LEFT as high prices push wages up.

400
Targeted rate by the FED, used by banks for over night loans
What is the Federal Funds Rate
400
Government spending and taxation rules that cause fiscal policy to expand when the economy contracts and to contract when the economy expands.
What is automatic stabilizers.
400
An increase in expected future inflation drives up the nominal interest rate, leaving the expected real interest rate unchanged. This is named after a man who coined this in the 1920's.
What is the Fisher Effect.
400
Nominal exchange rate at which a given basket of goods and services would cost the same amount in each country.
What is purchasing power parity
500
On the board, draw and correctly label a Stagflationary scenario.
See board.
500
This is how many years a full term in a member serves in the Board of Governors in the Federal Reserve System.
What is a 14 year term
500
Change in government purchases of goods and services is $20 million that leads to an increase of $200 million in Real GDP. What is the multiplier?
What is 10
500
When the government borrows to use expansionary fiscal policy, it runs the risk of causing this to private investment.
Crowding out effect.
500
Capital flows from Japan to the United States decreases, the U.S. dollar will......
What is Depreciate