Economics

Question 1

3 ways the Federal reserve can increase the money supply

Answer 1

1. Purchase government securities
2. Lower the discount rate
3. Lower the reserve requirement

Question 2

Demand Curve

Answer 2

Inverse relationship between price and quantity demanded.

1. Price (up) = Quantity (down)
2. Price (down) = Quantity (up)

Question 3

The demand curve shifts downward (left) when

Answer 3

Quantity demanded becomes smaller for each & every price

Question 4

The demand curve shifts upward (right)

Answer 4

Quantity demanded becomes larger for each & every price

Question 5

Ways to dampen the economy

Answer 5

1. increase interest rates
2. increase taxes
3. decrease govt spending
4. reduce money supply

Question 6

Real GDP Calculation

Answer 6

Nominal GDP divided by Price Index x 100

Question 7

The 2 approaches of GDP

Answer 7

1. Income Approach

2. Expenditure Approach

Question 8

Components of GDP income approach

Answer 8

1. income earned in the production of final goods and services.
   a. wages
   b. interest
   c. rents
   d. business profits
2. adjustments fro indirect taxes
3. economic depreciation

Question 9

Components of GDP expenditure approach

Answer 9

1. personal consumption expenditures
2. businesses
3. exports
4. imports

Question 10

The consumer price index measures?

Answer 10

the rate of inflation

Question 11

Net domestic product (NDP) calc

Answer 11

GDP - Depreciation

Question 12

Net national income (NNI) calc

Answer 12

NDP - indirect business taxes

Question 13

Personal Income calc

Answer 13

NNI - corporate income taxes - undistributed corporate profits - social security contributions + transfer payments

Question 14

Disposable income calc

Answer 14

Personal income - personal income taxes

Question 15

Reserve Ratio

Answer 15

Reserves / Total Demand Deposits

Question 16

Marginal propensity to Consume (MPC) Calc

Answer 16

chg in consumption (spending) / chg in disposable income

Question 17

Marginal propensity to Save (MPS) calc

Answer 17

chg in savings / chg in disposable income

Question 18

Structural Unemployment

Answer 18

Workers not having skills demanded and workers cannot easily move to the location jobs are available.

Question 19

Price elasticity of demand calc

Answer 19

%^ in quantity demanded / %^ in price

If less than 1 then inelastic

Question 20

Define economies of scale

Answer 20

The reduction in average total cost of production when a firm expands plant production

Question 21

A put is an option to

Answer 21

Sell a specific security at fixed conditions of price and time

Question 22

Concentration ratio measures

Answer 22

Market share of the several largest firms in the industry

Question 23

Inter industry competition is

Answer 23

Competition between different markets.

Question 24

Game theory is

Answer 24

A useful tool in choosing responses to actions of competitors

Question 25

A normal good is one which demand

Answer 25

Increases as income increases