Unit 4 Test Short Answer

List four areas on which state tax dollars are spent.

1. Education 2. Public Safety 3. Public Welfare 4. Highways and Transportation

Trade barriers take three common forms. Name and describe them.

1. Import quotas 2. Voluntary export restraints 3. Tariffs

The Federal Reserve has three tools for adjusting the amount of money in the economy. List them.

1. Money creation 2. Discount rate 3. Open market operations

List the arguments in favor of protectionism.

1. Protecting jobs 2. Protecting infant industries 3. Safeguarding national security

Functions of the banks that make up the core of the Federal Reserve System.

1. Serving government 2. Serving banks 3. Regulating the banking system 4. Regulating the money system

What are characteristics of a good tax?

1. Simplicity 2. Efficiency 3. Certainty 4. Equity

What is a balanced budget?

A balanced budget is a budget in which revenues are equal to spending.

Explain what is meant by a strong or a weak dollar. How does a strong or weak dollar affect prices of imports and exports?

A strong dollar is when a country's currency is appreciating and a weak dollar is when it's depreciating. A strong dollar will cause exports to be more expensive in other countries countries and imported good be less expensive for that country. A weak dollar will make a country's exports to become cheaper to other nations, and imports to that country become more expensive and likely to decrease.

What are inside lags and why do they occur?

Inside lags are delays in implementing monetary policy. They occur for two reasons. First, it takes time to identify and recognize a problem. Second, one a problem has been recognized, it can take additional time to enact appropriate policy.

How would you describe the balance of trade in the United States?

The United States has a large trade deficit.

What was the reasoning behind the creation of the Federal Reserve System?

The reasoning behind creating the Federal Reserve System was so a central group of banks could lend to other banks in times of need.