BA101 (Week 2) Chapter 3

Question 0

Recession

Answer 0

Two consecutive quarters of negative economic growth.

Question 1

Economic Growth

Answer 1

Change in the general level of economic activity.

Question 2

Aggregate expenditures

Answer 2

Total amount of expenditure in economy (spending by consumers)

Question 3

Gross Domestic Product

Answer 3

Total market value of all final products and services produced in U.S.

Question 4

4 types of unemployment

Answer 4

1. Frictional - people who are between jobs (unemployment is temporary)
2. Seasonal
3. Cyclical - people who are unemployed because of poor economic conditions.
4. Structural - they do not ave adequate skills.

Question 5

Inflation

Answer 5

Increase in general level of prices of products and services over period of time.

Question 6

Types of Inflations

Answer 6

1 Cost-Push: higher prices charged by firms are caused higher cost. (Ex: coke, delivery, oil)
2. Demand-pull: price of products and services are pulled up because of strong consumer demand.

Question 7

Law of Demand

Answer 7

Inverse relationship between price and quantity.

Question 8

Law of Supply

Answer 8

Direct relationship between price and quantity.

Question 9

Law of Equilibrium

Answer 9

Balance quantity of product supplied with quantity demand.

Question 10

Elastic Demand

Answer 10

Demand is highly responsive to price change (flatter curve)

Question 11

Inelastic Demand

Answer 11

Demand is not responsive to price change.

Question 12

Indicators

Answer 12

• Inflation
• Unemployment Rate
• GDP
• (lead) Interest Rates
• (best) stock market.

Question 13

Interest Rates

Answer 13

Determine the cost of borrowing money.

Question 14

Money Supply

Answer 14

Demand deposits (checking accounts)

Question 15

Federal Reserve System

Answer 15

Central bank of the United States

Question 16

Monetary Policy

Answer 16

Decisions on the money supply level in the U.S.

Question 17

Consumer Price Index

Answer 17

Measure of average of the price paid by urban consumers for a fixed market basic of consumers goods and services

Question 18

Federal Open Market Committee

Answer 18

12 voting members that decide the monetary policy, predict U.S economy.

Question 19

Fiscal Policy

Answer 19

Decisions on how fed government should set tax rates and spend money.

Question 20

Excise Taxes

Answer 20

Tax imposed by federal government on specific items.

Question 21

Federal budget deficit

Answer 21

Situation amount of fed gov spending exceeds the amount of fed taxes and other income.