Unit 4 Exam GDP/Inflation/Unemployment Monetary & Fiscal Policy

Unit 4 ExamUnit 4 Exam

GDP/Inflation/UnemploymentGDP/Inflation/Unemployment

Monetary & Fiscal PolicyMonetary & Fiscal Policy

Who creates fiscal policy?Who creates fiscal policy?

GovernmentGovernmentCongress & PresidentCongress & President

What monetary policy tool is the Fed What monetary policy tool is the Fed using when it sells government using when it sells government bonds?bonds?

Open Market OperationsOpen Market Operations

What rate of inflation is a single-digit What rate of inflation is a single-digit inflation rate? inflation rate?

CreepingCreeping

Due to this, the dollar buys less:Due to this, the dollar buys less:

InflationInflation

What term best describes the period between March and October, 2009?

Deflation

In how long does a person need to In how long does a person need to have inquired after a job to be have inquired after a job to be counted a part of the unemployment counted a part of the unemployment rate?rate?

1 month1 month

Current GDP is:Current GDP is:

$16 trillion$16 trillion

Inflation rate of 14% is considered:Inflation rate of 14% is considered:

Galloping inflationGalloping inflation

To exercise contractionary fiscal To exercise contractionary fiscal policy, what would the government policy, what would the government do about the tax rate?do about the tax rate?

Raise itRaise it

What effect would an easy money What effect would an easy money policy have on unemployment?policy have on unemployment?

Lower itLower it

To contract the money supply and To contract the money supply and lower inflation, how would the FOMC lower inflation, how would the FOMC conduct open market operations?conduct open market operations?

Sell government bondsSell government bonds

Unemployment during a recession is Unemployment during a recession is most likely due to:most likely due to:

Cyclical unemploymentCyclical unemployment

An unemployment rate considered to An unemployment rate considered to have reached full employment:have reached full employment:

~ 5%~ 5%

What effect does raising the reserve What effect does raising the reserve requirement have on the inflation requirement have on the inflation rate?rate?

Lowers itLowers it

What rate of inflation exists in the US?

Creeping

What rate of inflation exists in Zimbabwe?

Hyper inflation

What rate of inflation exists in Syria?

Galloping

How can the Fed use the discount How can the Fed use the discount rate to stimulate GDP growth?rate to stimulate GDP growth?

Lower itLower it

When was the Federal Reserve When was the Federal Reserve system created?system created?

19131913

How many federal reserve districts How many federal reserve districts does America have?does America have?

1212

How many people sit on the Fed’s How many people sit on the Fed’s Board of Governors?Board of Governors?

77

What Fed entity sets monetary What Fed entity sets monetary policy?policy?

Federal Open Market CommitteeFederal Open Market CommitteeFOMCFOMC

Who is the current Fed Chairman?Who is the current Fed Chairman?

Ben BernankeBen Bernanke

What is our current unemployment What is our current unemployment rate?rate?

9.9%9.9%

Which of the following is counted in Which of the following is counted in the unemployment rate?the unemployment rate?

Fred who works part time but needs Fred who works part time but needs fulltime workfulltime work

Paul who does not work, but lives off his Paul who does not work, but lives off his dad’s wealthdad’s wealth

Bob who lost his Job yesterday and has Bob who lost his Job yesterday and has already begun interviewing with Targetalready begun interviewing with Target

BobBob

Unemployment due to teens looking Unemployment due to teens looking for their first job:for their first job:

Frictional unemploymentFrictional unemployment

Unemployment due to a lawyer Unemployment due to a lawyer deciding to become a truck driver:deciding to become a truck driver:

Frictional unemploymentFrictional unemployment

Employment in what type of Employment in what type of industries are most affected by industries are most affected by recessions?recessions?

Those selling big ticket itemsThose selling big ticket items ie: boats, cars etc.ie: boats, cars etc.

What is the point in the business What is the point in the business cycle just before recovery?cycle just before recovery?

TroughTrough

What’s another word for the recovery What’s another word for the recovery phase of the business cycle?phase of the business cycle?

Expansionary phaseExpansionary phase

What often happens to workers laid What often happens to workers laid off during the recessionary phase off during the recessionary phase when the economy begins to when the economy begins to recover?recover?

Rehired Rehired

What type of unemployment What type of unemployment accounts for layoffs in the banking accounts for layoffs in the banking industry when ATM machines industry when ATM machines increasingly became the norm?increasingly became the norm?

Technological unemploymentTechnological unemployment

A hurricane wipes out 2,000 acres of A hurricane wipes out 2,000 acres of orange grove land in Florida. Fruit orange grove land in Florida. Fruit harvesters hit the unemployment harvesters hit the unemployment lines. Unemployment increases due lines. Unemployment increases due to:to:

Seasonal unemploymentSeasonal unemployment

The dollar value of the final goods The dollar value of the final goods and services produced within a and services produced within a country’s borders within a given country’s borders within a given year:year:

GDPGDP

What economic indicator is the What economic indicator is the measure of a nation’s output?measure of a nation’s output?

GDPGDP

What indicator reflects a nation’s What indicator reflects a nation’s production capacity?production capacity?

GDPGDP

Which IS included in calculating Which IS included in calculating GDP?GDP?

1.1. Sugar purchased by Betty CrockerSugar purchased by Betty Crocker

2.2. Tires purchased by Ford Motors Corp.Tires purchased by Ford Motors Corp.

3.3. DVDs purchased by a vacationer from DVDs purchased by a vacationer from a Chinese street vender in Hong Konga Chinese street vender in Hong Kong

4.4. Cucumbers purchased at the Farmer’s Cucumbers purchased at the Farmer’s MarketMarket

#4#4

Which is included in GDP?Which is included in GDP?

1.1. Concert tickets purchased on e-bayConcert tickets purchased on e-bay

2.2. Music downloaded illegallyMusic downloaded illegally

3.3. Flowers purchased online Flowers purchased online

4.4. A home-made dressA home-made dress

#3#3

What modification of nominal GDP is What modification of nominal GDP is used to allow economists to compare used to allow economists to compare one nation’s worker’s productivity to one nation’s worker’s productivity to another nation’s?another nation’s?

Per capitaPer capita GDP GDP

What economic indicator is a What economic indicator is a measurement of the nation’s measurement of the nation’s income?income?

GNPGNP

What economic indicator applies to What economic indicator applies to the following scenario?the following scenario?

The dollar value of production from a The dollar value of production from a foreign plant making power tools in New foreign plant making power tools in New JerseyJersey

GDPGDP

What economic indicator applies to What economic indicator applies to the following scenario?the following scenario?

Martha Stewart’s clothing line Martha Stewart’s clothing line manufactured in sweat shops in manufactured in sweat shops in Indonesia and shipped back to the USIndonesia and shipped back to the US

GNPGNP

What type of fiscal policy does the What type of fiscal policy does the graph below suggest?graph below suggest?

ExpansionaryExpansionary

Inflation rates in Germany during the Inflation rates in Germany during the Great Depression:Great Depression:

HyperinflationHyperinflation

Theory of inflation where demand Theory of inflation where demand exceeds supply:exceeds supply:

Demand-pull theoryDemand-pull theory

Cause of inflation wherein the Cause of inflation wherein the government is at fault for the government is at fault for the excessive demand:excessive demand:

Deficit spendingDeficit spending

What happens to the general price What happens to the general price level when expansionary monetary level when expansionary monetary policy injects too much money into policy injects too much money into the economy?the economy?

IncreasesIncreases

What product price increase would What product price increase would most broadly influence the general most broadly influence the general price level?price level?

OilOil

Who is most hurt by inflation?Who is most hurt by inflation?

Those on fixed incomesThose on fixed incomes

What type of policy is being What type of policy is being exercised by President Obama to pull exercised by President Obama to pull the U.S. out of the recession?the U.S. out of the recession?

Expansionary fiscal policyExpansionary fiscal policy

How do Republicans generally prefer How do Republicans generally prefer to exercise expansionary fiscal to exercise expansionary fiscal policy?policy?

Tax cutsTax cuts

How do Democrats generally prefer How do Democrats generally prefer to exercise expansionary fiscal to exercise expansionary fiscal policy?policy?

Spending increasesSpending increases

How would a Democrat most likely How would a Democrat most likely prefer to exercise contractionary prefer to exercise contractionary fiscal policy?fiscal policy?

Tax hikes (especially on the wealthy)Tax hikes (especially on the wealthy)

How would a Republican likley prefer How would a Republican likley prefer to exercise contractionary fiscal to exercise contractionary fiscal policy?policy?

Spending cutsSpending cuts

What economist is most associated What economist is most associated with advocating fiscal policy tools as with advocating fiscal policy tools as a way to end the Great Depression?a way to end the Great Depression?

John Maynard Keynes John Maynard Keynes

When the FOMC decides to counter a When the FOMC decides to counter a recession with loose or easy money recession with loose or easy money policy, how would it use its open policy, how would it use its open market operations?market operations?

Buy govt bonds from member banksBuy govt bonds from member banks

Why does lowering the discount rate Why does lowering the discount rate lead to lower bank interest rates?lead to lower bank interest rates?

More willing to lend up to reserve More willing to lend up to reserve requirementrequirement

What cause of inflation can be the What cause of inflation can be the result of the Fed buying govt. bonds result of the Fed buying govt. bonds from member banks?from member banks?

Excessive monetary growthExcessive monetary growth

Poverty/Stock Market/LaborPoverty/Stock Market/Labor

What is the ultimate power of a What is the ultimate power of a union?union?

The ability to go on strikeThe ability to go on strike

Which is NOT a limit on free trade?Which is NOT a limit on free trade?

1.1. EmbargoEmbargo

2.2. QuotasQuotas

3.3. WTOWTO

4.4. Tariff Tariff

What percent of American poor What percent of American poor remain poor over time?remain poor over time?

5%5%

How much of the poor move into the How much of the poor move into the richest 1/5 of the income richest 1/5 of the income distribution?distribution?

1/3 or 33%1/3 or 33%

What’s it called when stock prices What’s it called when stock prices are on the rise?are on the rise?

A bull marketA bull market

One way to get a sense of how the One way to get a sense of how the stock market is doing generally, is stock market is doing generally, is to look at the:to look at the:

1.1. NYSENYSE

2.2. DOWDOW

A contractually binding solution to a A contractually binding solution to a labor dispute provided by an labor dispute provided by an impartial third party is the result of:impartial third party is the result of:

arbitrationarbitration

When a country refuses to trade with When a country refuses to trade with another country for political another country for political purposes, it has placed an purposes, it has placed an ____________ on that country.____________ on that country.

embargoembargo

If one country can produce a product If one country can produce a product at a lower opportunity cost than the at a lower opportunity cost than the other country, it is said to have a(n):other country, it is said to have a(n):

Comparative advantageComparative advantage

There are two ways to make money There are two ways to make money off the stock market. One is to buy off the stock market. One is to buy low and sell high. The other is to hold low and sell high. The other is to hold on to your investments and collect:on to your investments and collect:

dividendsdividends

What is happening to stock prices in What is happening to stock prices in a bear market?a bear market?

fallingfalling

What is a tax on dividends called?What is a tax on dividends called?Capital gains taxCapital gains tax

What international organization both What international organization both replaced GATT and encourages trade replaced GATT and encourages trade in Third world nations?in Third world nations?

WTOWTOWorld Trade OrganizationWorld Trade Organization

Which free trade agreement Which free trade agreement benefited Mexico, Canada, and the benefited Mexico, Canada, and the U.S.?U.S.?

NAFTANAFTANorth American Free Trade North American Free Trade

AgreementAgreement

Who wants most to protect American Who wants most to protect American jobs?jobs?

ProtectionistsProtectionists

Who fears US dependence on foreign Who fears US dependence on foreign markets most?markets most?

ProtectionistsProtectionists

Who most appreciates lower prices Who most appreciates lower prices from foreign markets?from foreign markets?

Free tradersFree traders

Those who promote lowering trade Those who promote lowering trade barriers are:barriers are:

Free tradersFree traders