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.