Why is stagflation problematic to correct?

Solutions for inflation tend to make UE worse

Assume Company 1 & Company 2 operate as an oligopoly. Which best represents this?

They control over 75% of the market

National debt differs from government deficits in that

national debt is the sum of all past deficits plus interest

When there is inflation in an economy what is always true?

the consumer price index has increased

Which person is considered frictionally UE?

Jake, who has recently entered the labor force.

Erica and Shirelle run a photography business as a partnership, but think about a corporation.

A disadvantage is double taxation

You are presented with data about prices of select goods over several years...for what purpose?

Compile a price index to measure inflation

Turkey trades textiles, food, & building materials to Germany for their technology & cars since

each country has comparative advantage in different goods

When the household income increases, what is the likely result?

The demand curve shifts to the right

A market basket is generally used to

compare prices of goods between years to calculate CPI

The town of Shermanville closed the blacksmith factory due to outsourcing.

The blacksmiths are structurally UE

Which best describes an economy that is in a trough of the business cycle?

UE is high, rGDP is low, & inflation is low

To calculate UE rate you would need the total number of UE people plus what?

the number of people in the labor force

Gross Domestic Product is calculated by adding

Consumption, Investment, Government, Net Exports

Which part of the Fed Reserve system holds the most power for monetary policy?

The Federal Open Market Committee

Having a comparative advantage in a good means a country can produce that good

at a lower opportunity cost than another country

Which will the Fed Reserve do in a recession?

Buy treasury bonds on the open market

Demand for gasoline is said to be fairly inelastic for many because

it has few substitutes/is necessary for most transportation

Government increases taxes.....what combination of events is related?

Consumption decreased, AD decreased, GDP decrease

Monetary policy is defined as

decisions of the Fed Reserve to determine the money supply

Elasticity of supply and demand is mostly related to

changes in prices and quantities of goods

A budget surplus means that

Govt has taken in more money than it spent

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Final Exam Review 2

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Questions 35

Answers

1
The actions of the Fed Reserve that control & regulate the money supply are called
monetary policy
fiscal policy
opportunity costs
international trade
2
Why is stagflation problematic to correct?
It is hard because it can't be appropriately diagnosed
Economy declining inflation & business won't increase prices
Solutions for inflation tend to make UE worse
There are no real corrections for sluggish economies
3
A market structure in which there is only one seller is known as a
Pure Competition
Oligopoly
Monopoly
Monopolistic Competition
4
Assume Company 1 & Company 2 operate as an oligopoly. Which best represents this?
They are major corporations with stockholders
They own many different "brands"
They have products that are different, but marketed the same
They control over 75% of the market
5
A key advantage of a partnership is
unlimited liability of the partners
limited liability of the partners
specialization of the partners
ease of raising capital through stockholders
6
National debt differs from government deficits in that
debt only includes money owed for the current fiscal year
national debt is the sum of all past deficits plus interest
deficits include all debts owed over time with interest
deficits only apply to monetary decisions by Congress
7
When there is inflation in an economy what is always true?
the purchasing power of the dollar increases
exports to other countries increases
the consumer price index has increased
UE will automatically decrease
8
Which person is considered frictionally UE?
Jennifer, whose skills are no longer needed.
Jill, who quit her job to become a full time student
Jimmy, who lost his family farm.
Jake, who has recently entered the labor force.
9
Erica and Shirelle run a photography business as a partnership, but think about a corporation.
A disadvantage is unlimited liability
A disadvantage is double taxation
A disadvantage is the ease of setup
A disadvantage is sharing of profits
10
You are presented with data about prices of select goods over several years...for what purpose?
Calculating GDP
For calculating UE
Compile a price index to measure inflation
Decide whether or not to buy bonds on the open market
11
Which is not a goal promoted by the government through fiscal policy?
price stability
economic growth
money supply
full employment
12
Turkey trades textiles, food, & building materials to Germany for their technology & cars since
neither country has an absolute advantage in any good
both countries share comparative advantage in the same goods
each country has comparative advantage in different goods
the countries are forced to trade with each other
13
When the household income increases, what is the likely result?
The demand curve shifts to the right
The supply curve will shift to the left
The supply curve becomes vertical
The demand curve shifts to the left
14
A market basket is generally used to
advertise new products for companies
put things in while you walk around the store
compare prices of goods between years to calculate CPI
determine the total amount of real GDP
15
Which provides the greatest incentive for entrepreneurs to take a risk?
inflation
interest
profits
prices
16
When the money supply is increased, which will happen?
the price level will increase
the price level will not be affected
each dollar will be able to buy more goods
the price level will decrease
17
The town of Shermanville closed the blacksmith factory due to outsourcing.
The blacksmiths are structurally UE
The blacksmiths are frictionally UE
The blacksmiths are cyclically UE
The blacksmiths are nominally UE
18
Which best describes an economy that is in a trough of the business cycle?
UE is high, rGDP is high, & inflation is low
UE is high, rGDP is low, & inflation is low
UE is low, rGDP is high, & inflation if high
UE is low, rGDP is high, & inflation is low
19
To calculate UE rate you would need the total number of UE people plus what?
the inflation rate
the number of people in the labor force
the total number of transactions in the resource market
the total number of discouraged workers
20
Gross Domestic Product is calculated by adding
Wages, Rent, Interest, Dividends
Consumption, Investment, Government, Net Exports
Consumption, Interest rates, Government, Net Exports
Consumption, Investment, Government, Business expenditures
21
When the Fed is conducting open market operations, they are buying/selling
factors in the factor/resource market
stocks on the NY Stock Exchange
government bonds/securities
goods in the product market
22
Which part of the Fed Reserve system holds the most power for monetary policy?
The 12 District Banks
The Federal Open Market Committee
The Board of Governors
Congress and the President
23
Having a comparative advantage in a good means a country can produce that good
cheaper than most countries
better than every other country in the world
at a lower opportunity cost than another country
comparatively faster than other countries
24
Which will the Fed Reserve do in a recession?
Buy treasury bonds on the open market
Raise the reserve requirement
Sell treasury bonds on the open market
Raise the discount rate
25
Demand for gasoline is said to be fairly inelastic for many because
it has few substitutes and is in large supply
it has few substitutes/is necessary for most transportation
it is difficult to make cheaply
it has many substitutes and is easily attained
26
Comparing rGDP over two consecutive years best determines which economic measurement?
economic growth
equilibrium price
equity
exchange rates
27
Government increases taxes.....what combination of events is related?
Consumption increase, AD increase, GDP increase
Consumption decrease, AD decrease, GDP increase
Consumption decreased, AD decreased, GDP decrease
Consumption decrease, AD increase, GDP decrease
28
In October Jeremy is laid off from his Halloween costume making job due to a slow season.
Jeremy is naturally UE
Jeremy is cyclically UE
Jeremy is frictionally UE
Jeremy is structurally UE
29
Monetary policy is defined as
buying & selling of currency in foreign exchange markets
decisions of the Fed Reserve to determine the money supply
taxing & spending decisions of the US Govt
interaction of buyers and sellers in the market place
30
Elasticity of supply and demand is mostly related to
opportunity costs
effects of monetary and fiscal policies
appreciation and depreciation of currencies
changes in prices and quantities of goods
31
Economy is in recession-what can Congress & Fed Reserve do to correct it quickly?
cut taxes, sell treasury bonds
increase G spending, sell treasury bonds
raise taxes, buy treasury bonds
cut taxes, buy treasury bonds
32
If an economy is currently in a recession, which stage of the business cycle will come next?
cyclical
trough
expansion/recovery
peak
33
If the price of an item increases, demand for its substitutes
is not affected
increases
decreases
there is no way to tell
34
Finding the amount of rGDP produced at all possible price levels will determine
growth
inflation
aggregate supply
aggregate demand
35
A budget surplus means that
Fed has spent more money than the Govt
Govt has taken in more money than it spent
Govt has spent more money than the Fed
Govt has spent more money than it took in

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