Economics Exam

Opportunity cost of 1 ton of steel =

1/2 ton of aluminum

If government increases taxes, what will happen to the Aggregate Demand curve?

AD curve goes to the left

Highest liquidity

Cash

Advantage associated with opportunity cost

Comparative advantage

M1

Currency + demand deposits + other checkable deposits

What is one major category that separates national debt from public debt?

Debt held by other government agencies

Lowest interest rate

Federal Funds Rate

Not a common argument against free trade

It causes prices of imported goods to rise.

Important reason why the Federal Reserve wouldn't want to keep the interest rates at 0%

It limits the ability for the Fed to use expansionary monetary policy when the next recession occurs.

Under which condition would the Fed most likely engage in its role as a leader of last resort

Lack of confidence causes savers to withdrawal money from banks

2 common measures of money supply

M1 + M2

Most important function of the Federal Reserve

Open-market Operations

Which of the following is a critical dilemma when implementing fiscal policy in reference to timing lags?

The recession trying to be fixed is already in recovery.

In a market for loneable funds, savers are shown as

Upward sloping supply curve /

Countries move from highly restricted trade toward freer trade, what would be the expectations of the wages?

Wages are moving towards equality.

If the Federal Reserve pursues expansionary monetary policy,

aggregate demand shifts to the right

Suppose Canada increases quantity of tulips imported, consumers will be _ and producers will be _.

better off, worse off

Federal Reserve will use its tools to counteract

booms/recessions

Reducing government spending + transfer payments + raising taxes

contractionary fiscal policy

Automatic stabilizers have _ effects during economic prosperity and _effects during economic downturn.

contractionary, expansionary

Liability for a bank

customers checking account

Specifically designed to increase long run aggregate supply

develop new technology

Not part of the financial system

digital market

Functions performed by Federal Reserve Banks

distribute coins and currency

2 goals of monetary policy

economic growth and stabilize prices

International trade theory

everyone has to have a comparative advantage in something

If an economy is in recession, the federal reserve will most likely pursue an _ monetary policy which causes interest rates to _.

expansionary, go down/fall

Countries can gain from trade as long as the differences in the prices of a trade good between 2 countries is

greater than the cost of transporting it.

Primary causes of the 2007-09 US financial crisis

housing bubble, easy lending standards, low interest rates

Industries should be protected by quotas/tariffs is apart of the

infant industry argument

Monetary policy is subject to

information lags, recognition lags, decision lags, and implementation lags

If the economy has high levels of unemployment, the Federal Reserve will

lower interest rates

If the economy is operating below long run output, the Federal Reserve should

lower interest rates

Monetary policy deals with how

money supply is controlled to target interest rates

All programs are mandatory except

national defense

A bonds price in yield moves in

opposite direction

Federal funds rate is the interest rate that banks charge other banks for

overnight loans.

A country has an absolute advantage of a good if it can

produce more.

Advantages of coins over bills include all except

production cost lower for coins than bills

If the economy is facing inflationary pressures, the Federal Reserve will

raise interest rates

A form of US public debt

savings bonds

Which asset would have the highest rate on return after 20 years?

shared stock on social media

In order for the Federal Reserve to raise interest rates, it needs to

shrink the money supply

A tariff of 15% on imported artwork is an example of a

special tariff.

Main feature of fractional reserve banks system

to loan out to make money

Incentive to save.. supply for loneable funds will shift _ and _ interest rates

to the right, decrease

If a firms product demand increases, demand for loneable funds will shift _ and interest rates will _

to the right, increase

As free trade expands

workers and industries with a comparative advantage lose their jobs.