EC 222 test four

Before year 1 Jigar has $0 in an investment account. Then at the beginning of year 1 he begins putting $5000 a year into an account which earns 9% annual interest. How much will Jigar have at the end of 4 years in total interest earned and principal? He uses compounded interest.

Calculate A: 24923.55

Which two countries own most of the US debt?

China and Japan

Which model believes that gov't should enact programs that create jobs in order to end a recession?

Keynesian

What is wise advice for raising your credit score?

Pay all your bills early or on time.

Which of the following is a characteristic of a bond?

it pays interest to the holder

Which is true?

The rule of thumb for student loans is to never borrow more than your expected starting salary.

Who owns most of the US gov't debt?

US gov't agencies

Why is the "invisible hand" important?

Because it motivates people and businesses to seek what is best for them without gov't interferences.

Before Year 1 Dylan had $0 in investment savings. Then he begins to put $9000 a year into an account each year for 3 years. At the end of 3 years how much in total interest and principal will he have earned at the end of the 3rd year? The annual interest rate is 6%.

Calculate A. 30,371.54

Year Gov't Spending Tax Revenues 2000 $40 B $30 B 2001 $70 B $85 B 2002 $100 B $60 B 2003 $120 B $70 B Assume Country X was founded in the year 2000. What is the country's debt in the year 2003?______ What is the country's deficit in the year 2003? _____

Calculate: A: 85 billion debt and 50 billion defitct

Which believes that wages will fall when there is a recession? Thus, there is no need for the gov't to intervene.

Classical

Which of the Macro Models believes that struggling businesses should be allowed to fail. Once they fail, the resources will be shifted into more productive, high demand businesses.

Classical

Classical Macroeconomics

Father Adam smith Invisible Hand No government intermission

Supply Sliders

Father Ronald Regan believe in cutting taxes to increase LRAS

What is good advice for someone who wants to have enough wealth to retire comfortably by age 55?

Invest for the long-run. Avoid day-trading.

Which Macro policy believes that gov't must get involved in ending recessions because prices and wages are slow to adjust.

Keynesian

Which macro policy was adopted by Franklin D. Roosevelt as part of his strategy to end the Great Depression?

Keynesian

Which Macro Models believe in taking actions to end recessions that will increase AD?

Keynesian & Monetarists

Used during the Great Depression?

Keynesian Economics

Which of the following is good advice for a wise money manager?

Remember that investments that pay out low returns have lower risks of losses.

Name four ways a entrepreneurs can raise funds for their business?

Stocks, Bonds, Bank loans, Venture capitalists

Which Macro Model believes that when income taxes are lowered, the labor force will grow and economic growth will increase?

Supply-Siders

Which model believes that the Earned Income Tax Credit, where low income workers receive a tax refund, is positive for long-term economic growth?

Supply-Siders

Monetarists

Supporters of an economic theory emphasizing the role of money supply in an economy Father Milton Friedman

T/F Compound intrest grows faster than simple intrest because the intrest earned will earn intrest?

T

T/F People should start saving at a young age?

T

What is wise money management advice?

Take advantage of company retirement and investment plans Be sure that you regularly spend less than you earn. Borrow as little as possible. Diversify your investments

Which is true?

The author of your textbook says that a company stock's P/E is one of the best indicators for determining if the share price is reasonable.

Which is true of a corporate stock?

The owners will usually receive a share of the company's profits each quarter.

Keynesian economics

Theory based on the principles of John Maynard Keynes, stating that government spending should increase during business slumps and be curbed during booms.

What is a benefit of purchasing mutual funds?

They provide professional money managers and come in many different types.

So you want to start your own business and need funding. What option do you have?

You can raise funds from Venture Capitalists. Your company can issue shares of stock. Your company can get a bank loan. Your company can issue bonds.

Which of the following has the highest liquidity?

a bank savings account

Which believes that federal deficit spending is justified when used to end a recession?

Keynesian

What are some money management tips?

Get quality work experience in your career field while in college.

What is the amount of the total US debt? (You may round)

Around 29 trillion.

Ashlyn just turned 19 years old. She puts $2000 into an investment account earning 10% annual interest each year for 8 years. ($16,000 total invested.) She never makes another deposit in the account but leaves it in the investment fund until she turns 65. What will it be worth when she is 65 if it continues to earn 10% a year? About _______

$1,000,000

The US federal budget deficit for fiscal year 2020 was about

$3 trillion

Key economics principles

1. Resources are scarce, which forces people and gov't to make choices. These choices have costs. 2. People respond to incentives in predictable ways. 3. Voluntary trade can make all parties better off. 4. In a free market system, shortages cause prices to rise which will end the shortages. Surpluses cause prices to fall, which will end the surplus. 5. Although markets are a good way to organize trade, governments should sometimes intervene when innocent people are harmed. 6. The more productive workers are, the higher the country's living standards. 7. When the nation's money supply increases much faster than output increases, inflation will rise. 8. A country's debt is its total accumulation of all deficits and surpluses over the years. A country's deficit is the amount that gov't spending exceeds gov't tax revenue for one fiscal year. 9. When gov't spending increases, GDP will increase by a larger amount than the increase in gov't spending. This is the Keynesian Multiplier Effect.

The US debt/GDP ratio is about _____. The goal for a country's debt/GDP is ______.

130%; 70%

The average US debt amount for each US citizen is about _____ The amount of interest paid by the US gov't to its bondholders is about _____ each year.

$85,000; $600 billion

US Unemployment rate

4.6

US Inflation rate

5.4

US GDP

6.7

Which is true?

A mutual fund provides investors the benefits of diversification without demanding a large investment.

Of the Macro Schools of Economics, which believed that the way to reduce excessive inflation is to reduce the money supply?

Monetarists

Which model believes that the money supply should be increased in order to end a recession?

Monetarists

Should the US have a spedning deficit of the economy is at full employment?

No, governemnt spending should decrease

How long will it take Kelsey to pay off her credit care if she pays the 2% minimum payment each month and her credit card charges 17% annual interest? She has $1000 on it currently and will not use it again until it is paid off.

about 7 years