Economcis 4

What organizations are responsible for regulating financial markets in the United States? (choose all that apply)

1. Securities and Exchange Commission 2. Federal Reserve System

Which of the following are examples of international economic institutions? (choose all that apply)

1. World Bank 2. International Monetary Fund

Which of the following are ways that the United States government provides ongoing economic support? (choose all that apply)

1. assuring the nation's financial institutions remain healthy 2. promoting innovation and invention 3. supporting jobless workers with unemployment insurance

How many economic downturns occurred in the United States between 1855 and 2020?

33

Let's say that at the beginning of the year, $100 could buy 100 loaves of bread. By the end of the year, that $100 could only buy 95 loaves of bread. What was the rate of inflation for that year?

5%

The supervising body of the Federal Reserve that is responsible for providing general guidance to the Fed and supervising the regional banks is called the Board of ________.

Governors

Concerning full employment, Hazlitt writes that "the real question" isn't how many jobs there will be in the United States at a particular point in time. Instead, "the real question" is what?

How much will the nation produce, and what will be the standard of living?

The worst period of inflation in history occurred in 1946, when prices doubled every 15.6 hours in the nation of ___________.

Hungary

Short Answer: In one sentence, explain why inflation hurts people who have saved money. Your Answer:

Inflation hurts people who save money because the value of money decreases. Even though the people who saved money did not purchase or buy something, the money's value decreases overall. This means what might have cost 100 dollars now costs 120 dollars, depending on the inflation rate.

Hazlitt writes, "Even a relatively mild inflation distorts the structure of production." Why does he say this is the case?

Inflation results in the overexpansion of some industries at the expense of others, leading to a misapplication of capital.

Classical economists like Adam Smith believed the economy was self-correcting in the long run. Which economist argued that waiting for the economy to self-correct was foolish, saying, "In the long run we're all dead," and instead recommended strong action by the government to jump-start the economy?

John Maynard Keynes

Who popularized the theory of the paradox of thrift?

John Maynard Keynes

The largest stock market in the world is the _______________.

New York Stock Exchange

Match each American recession with its description. The Oil Crisis Recession

One factor that caused this recession was the introduction of wage and price controls.

What does Hazlitt say about the rate of tax imposed by inflation?

The rate is not a fixed one and cannot be determined in advance.

Short Answer: In one sentence, list the two primary fiscal policy strategies used to combat slow growth and high unemployment. Your Answer:

The science and art of military command as applied to the overall planning and conduct of warfare.

Monetary inflation can create a chain reaction that results in even more inflation. This occurs because monetary inflation can cause ___________ inflation when people recognize that the value of their money is going to decline in the future.

demand-pull

An extremely long and severe economic contraction is called a(n) _________.

depression

Hazlitt writes that "savings" can be defined as the available supply of new capital and that "investment" can be defined as the demand for new capital. Just like supply and demand determines the price for anything else, supply and demand determines the price that savers are paid for loaning out their money. What does Hazlitt say is "the special name for the price of [this] loaned capital"?

interest rate

What government economic strategy reduces taxes on businesses who invest in increasing their productivity?

investment tax credits

Hazlitt admits that inflation might sometimes be able to correct the causes of an economic depression, but that it is a "dangerous method" because ____________.

it makes its corrections not openly and honestly, but by the use of illusion

In the story about Milton Friedman visiting an overseas construction site, Friedman suggests that more jobs could be created by taking away the workers' shovels and giving them _______.

spoons

When soldiers are discharged from the military and become private citizens, it will increase total national production because _______________.

the soldiers will become self-supporting and get paid for producing additional goods and services

In Chapter 9, Hazlitt writes that the justification for public jobs like police officers, firefighters, judges, and legislators "does not consist in the 'purchasing power' they possess by virtue of being on the public payroll," but instead "consists in the _______ of their services."

utility

Why do consumers reduce their buying after an economic downturn has started? (choose all that apply)

1. Because they fear they may lose their jobs. 2. Because prices of goods have already fallen, and they fear a further fall.

According to Hazlitt, which of the following are true about hoarding? (choose all that apply)

1. Irrational hoarding of cash is harmful in most economic situations. 2. Dishoarding, as people die and their hoards are discovered by others, likely offsets new hoarding.

According to Hazlitt, which of the following are effects of keeping interest rates artificially low? (choose all that apply)

1. It increases the demand for capital. 2. It encourages highly speculative ventures.

According to Hazlitt, which of the following are true about new capital? (choose all that apply)

1. Producers invest in new capital goods because they reduce the costs of production. 2. Even if a greater quantity of goods isn't needed, new capital can create goods of improved quality.

Which of the following Congressional acts together established the Securities and Exchange Commission? (choose all that apply)

1. Securities Act of 1933. 2. Securities Exchange Act of 1934.

According to Hazlitt, many proponents of inflation realize that it will decrease the purchasing power of money and increase the prices of goods and services. What are reasons these proponents of inflation want inflation anyway? (choose all that apply)

1. They believe it's an essential measure to cure a depression. 2. They believe it will jump-start industry and lead to full employment. 3. They believe it will stimulate imports and discourage exports. 4. They believe it will improve the position of creditors as compared with debtors.

Which of the following are examples of supply-side policies the government can use to encourage economic growth and lower unemployment? (choose all that apply)

1. deregulation 2. job training programs

In the discussion of maximizing employment versus maximizing production, Hazlitt writes that "production is the _____, employment merely the _____."

1. end 2. means

Which of the following are examples of monetary policy strategies the government can use to encourage economic growth and lower unemployment? (choose all that apply)

1. increasing the money supply 2. lowering interest rates

What factors affect the different phases of the business cycle? (choose all that apply)

1. monetary policy 2. technological change 3. consumer-producer confidence 4. fiscal policy

Inflation has a positive impact on which of the following groups? (choose all that apply)

1. people who own homes 2. people who've borrowed money at fixed rates

Which of the following are services provided by the Federal Reserve? (choose all that apply)

1. supplying banks with paper money and coins 2. protecting consumers through regulation and education 3. processing checks and electronic payments

Which of the following are main goals of the Securities and Exchange Commission? (choose all that apply)

1. to protect investors 2. to ensure that financial markets are fair, orderly, and efficient 3. to encourage the creation of capital resources

At the beginning of the year, $100 could buy 100 loaves of bread. By the end of the year, that $100 could only buy 90 loaves of bread. What was the percentage of inflation for that year?

10%

How many regional Federal Reserve banks are there?

12

In the United States, the highest level of inflation since the Great Depression occurred in 1979. What was the percentage of inflation in 1979?

13%

At the height of the Great Depression in 1933, the unemployment rate reached a high of ________.

24.9%

Match each American recession with its description. The Great Depression

During this economic downturn, unemployment reached a height of 24.9%.

What committee is responsible for conducting monetary policy?

Federal Open Market Committee

________ policy refers to changes in federal taxation and spending that are designed to influence the economy.

Fiscal

Short Answer: In one sentence, explain why it's important to understand the federal government's economic goals? Your Answer:

It is important to understand the federal government's economic goals because policies are created with them in mind.

An example of international economic institution is the IMF, or International __________ Fund.

Monetary

One of the American government's ongoing economic policies is assisting research through grants and programs. Which of the following agencies is an example of such programs?

National Institutes of Health

What American recession was triggered by a subprime mortgage crisis, which led to a bank credit crisis?

The Great Recession

Match each American recession with its description. The Panic of 1893

This economic contraction was set off by the failure of the Philadelphia and Reading Railroad.

Match each American recession with its description. The Great Recession

This recession was triggered by a subprime mortgage crisis, which led to a bank credit crisis.

Which of the following scenarios would likely result in cost-push inflation?

an increase in the minimum wage

Why does Hazlitt say, "Inflation is the opium of the people"?

because inflation deceives almost everyone, including those who suffer from it

According to the video, one factor that affects the different phases of the business cycle is consumer-producer _____________.

confidence

Hazlitt argues that saving is not a cause of depressions but is instead a(n) __________ of depressions.

consequence

The period of the business cycle where growth slows down and unemployment increases is called the ____________ phase.

contractionary

When businesses raise prices to cover increasing costs, it results in ____________.

cost-push inflation

One potential cause of unemployment is seasonal fluctuations in _________.

demand

Monetary inflation can create a chain reaction that results in even more inflation. This occurs because monetary inflation can cause _______________ when people recognize that the value of their money is going to decline in the future.

demand-pull inflation

When demand for goods and services becomes greater than supply, it results in _________.

demand-pull inflation

Nearly all market economies experience long-term growth because of ___________.

economic incentives

Markets where securities are traded are collectively known as __________ markets.

financial

Traders can exchange different currencies on the __________.

foreign exchange market

Hazlitt argues that "nothing is easier to achieve than full employment" when it's "taken as an end to itself" instead of being tied to the goal of _______________.

full production

Raising the reserve requirement will lead to __________ interest rates.

higher

When the Federal Reserve sells securities to banks, it leads to ___________ interest rates.

higher

The Consumer Price Index measures inflation by looking at a selection of common goods. The three main categories of goods covered by the CPI are food and beverages, clothing, and __________.

housing

If the discount rate is low, the overall money supply will __________.

increase

What is usually a downside of lowering taxes and increasing government spending?

increased government borrowing

Which of the following scenarios would likely result in demand-pull inflation?

increased government spending

Hazlitt writes that "savings" can be defined as the available supply of new capital, and "investment" can be defined as the demand for new capital. Just like supply and demand determines the price for anything else, supply and demand determines the price that savers are paid for loaning out their money. What does Hazlitt say is "the special name for the price of [this] loaned capital"?

interest rate

One argument made against reducing the bureaucracy is that it would hurt the economy by reducing the purchasing power of the dismissed officeholders. What fallacy causes this argument to be made?

looking only at the effects on one group, the dismissed officeholders, instead of the effects on everyone

The Federal Reserve's goals of helping America achieve stable prices, economic growth, and full employment is referred to as the Fed's ____________.

mandate

In the discussion of maximizing employment versus maximizing production, Hazlitt writes that "production is the end, employment merely the ______."

means

When the money supply increases more than the output of goods and services increases, it results in _________.

monetary inflation

Companies whose stock is freely traded on a stock market are called _______ companies.

public

A long economic contraction, defined by some economists as a contraction lasting more than six months, is called a(n) ____________.

recession

Hazlitt writes that inflation "is a tax not only on every individual's expenditures" but also on every individual's __________________.

savings account and life insurance

A tradable financial asset, such as a stock or bond, is called a ________.

security

The official unemployment rate in the United States includes any individuals over the age of __________ who are working for pay or seeking paid work.

sixteen

In Chapter 9 of Economics in One Lesson, Hazlitt discusses that there is often a fear that there won't be enough jobs for soldiers when they return to the workforce after a war. Hazlitt admits that it may require some time for private industry to provide jobs for all these new workers. He writes that, in the past, the "chiefly remarkable" thing about getting jobs for all the former soldiers has been the _____ with which the process was accomplished.

speed

Of the following investments, which has historically had the best performance over the long term but suffers from more volatility?

stocks

Government policies designed to create economic growth by increasing productivity and efficiency are called ____________.

supply-side policies