Chapter 2: The Economic Environment

Question 1

This type of economics deals with individual actors in the economy

Answer 1

Microeconomics

Question 2

This type of economics deals with the big picture such as how markets react to events

Answer 2

Macroeconomics

Question 3

This type of indicator tells us where we are going

Answer 3

Leading Indicator

Question 4

This type of indicator tells us where we are in the economic cycle

Answer 4

Concurrent Indicator

Question 5

This type of indicator tells us what part of the cycle we just went through

Answer 5

Lagging Indicator

Question 6

Three purposes of money:

Answer 6

Medium of exchange, store of value, and unit of account

Question 7

What is monetary policy?

Answer 7

Measures taken by central banks to control the amount of money and securities in circulation

Question 8

What is fiscal policy?

Answer 8

Measures taken by governments such as taxation, regulation and spending

Question 9

What is the goal of monetary and fiscal policy?

Answer 9

To create manageable growth

Question 10

Does increasing interest rates stimulate or stunt economic growth?

Answer 10

Stunt. Increasing interest rates makes it harder for consumers to borrow money to make purchases

Question 11

Does increasing money supply expand or contract the economy?

Answer 11

Expand

Question 12

Does issuing government securities expand or contract the economy?

Answer 12

Contract - gets investors to put their money into a safer investment rather than a growth-oriented investment

Question 13

Does decreasing tax stimulate or stunt economic growth?

Answer 13

Stimulate - more disposable income in consumer’s pockets

Question 14

Does decreasing government stimulate or stunt economic growth?

Answer 14

Stunt

Question 15

Does increasing regulation stimulate or stunt the economy?

Answer 15

Stunt