General Economics
What is the goal of economics?
The three major concerns of macroeconomics and how each is measured.
What is:
Output, measured by GDP
Price Stability, measured by the CPI
Employment, measured by the unemployment rate
The formula for Gross Domestic Product (GDP)
What is C + I + G + Net Exports?
M1
What is currency held outside banks, demand deposits and savings accounts.
An economy is which households and firms pursue their own self-interest with minimal central direction or regulation.
What is a market economy or a Laissez-Faire economy.
As aggregate income increases, aggregate consumption increases but not by as much as the increase in aggregate income.
What is the Keynesian Consumption Function?
When the unemployment rate is lower and inflation is rising.
What is an expansionary period?
Rising interest rates are typically used to combat this?
What is inflation?
What is collection of taxes, paying Federal expenditures and issuing Treasury Bonds when the country is operating with a budget deficit?
Two consecutive quarters of negative GDP.
What is a recession?
What is a supply curve shifting to the left.
Tools used to adjust fiscal policy
What are taxes, government spending and regulations?
This is the price for borrowing money.
What are interest rates?
Banks hold only a fraction of their deposits and lend the rest.
What is a fractional banking system?
Economics, as a discipline, is often traced to a book this man wrote in 1776.
Who is Adam Smith?
A decline in aggregate output for two consecutive quarters.
What is the definition of a recession?
1/MPS
What is the expenditure multiplier?
The Federal Reserve buys bonds:
What is the impact on the money supply?
Which direction does the money supply curve shift?
How are interest rates impacted?
The money supply increases.
The money supply curve shifts to the right.
Interest rates decline.
Policy tools of a central bank.
What are the discount rate, the required reserve ratio and the open market operations?
The next best alternative we forgo when we make a choice or decision.
What is opportunity cost?
The stages of the business cycle.
What is trough, expansion, peak and recession?
The change of income that is saved.
What is the marginal propensity to save?
President proposes an economic plan that would balance the budget by increasing taxes and decreasing government spending. At the same time, the Federal Reserve sells bonds. What is the impact on GDP?
Consumption will decrease as income decreases.
Government spending will decrease.
Change in Investments is uncertain as interest rates initially increase and then decrease as output decreases.
The Federal Reserve buys $5 trillion in bonds to the public and the required reserve ratio for banks is 10%. What is the impact on the money supply?