economics 601-675

Question 1

what are the 6 powers granted to the fed reserve by congress?

Answer 1

conduct monetary policy, supervise financial institutions, lend money to financial institutions, serve as a bank for the government, issuer currency,provide services to financial institutions

Question 2

How does the government generally aim to achieve monetary targets?

Answer 2

through manipulation of interest rates via the Federal Reserve

Question 3

What does the Federal Reserve do to help achieve the economic goals stated in the Full Employment and Balanced Growth Act of 1978?

Answer 3

The Fred manipulates the money supply.

Question 4

when economists refer to “the money supply” to which category of money are they normally referring

Answer 4

m1

Question 5

you take out a loan in the amount of $25,000 and end up paying $50,000 over the course of 30 years. what is the principal

Answer 5

$25,000

Question 6

about how much cash is there in circulation per citizen in the us economy

Answer 6

$1,500

Question 7

what does inflation do to the value of money

Answer 7

inflation devalues money

Question 8

prices in kosovo are measured in kumquats. kumquats are being used as a (medium of exchange/ unit of account/ store of value)

Answer 8

unit of account

Question 9

according to the phillips curve, low inflation corresponds to _____ unemployment

Answer 9

high

Question 10

if inflation is at 4%, what nominal interest rate must a lender charge to earn a real interest rate of 5%

Answer 10

9%

Question 11

what is disinflation

Answer 11

a decrease in the inflation

Question 12

high employment + high inflation =

Answer 12

stagflation

Question 13

an unanticipated decrease in the rate of inflation benefits (credits/debtors/ neither)

Answer 13

creditors

Question 14

what is a time deposit

Answer 14

money that must be held in a deposit for a certain length of time, usually in exchange for additional interest

Question 15

m3 consists of what elements

Answer 15

m2 plus eurodollars, time deposits of over $100,000 and certain money market funds which take a long time to return money to investors

Question 16

what are some important characteristics of money if it is to fulfill its roles

Answer 16

portability, recognizability, durability, difficulty of duplication

Question 17

if nomal gdp is $300 billion, and the gdp deflator is 200, what is real gdp

Answer 17

$150 billion

Question 18

what is the prime rate

Answer 18

the interest rate that banks charge their most credit-worthy customers for short term loans

Question 19

define stagflation

Answer 19

a period of high unemployment in a time of high inflation

Question 20

define “Cost-push inflation”

Answer 20

cost-push inflation is the result of rising production costs, which force producers to raise the selling prices of their goods

Question 21

define deflation

Answer 21

a decrease in general price levels

Question 22

mortgage rates have general (increased/decreased) since the early 1980sw

Answer 22

decreased

Question 23

how are the different categories of money, such as m1 and m2, divided

Answer 23

according to liquidity

Question 24

according to the phillips curvre, high inflation corresponds to ____ unemployment

Answer 24

low

Question 25

what is deflation

Answer 25

a general decrease in price levels

Question 26

at higher interest rates, individuals borrow (less/more) money

Answer 26

less

Question 27

l consists of what elements

Answer 27

m3 plus savings bonds, government securities, commercial paper and other obscure financial instruments

Question 28

what is the wealth effect as related to inflatoin

Answer 28

if the price level decreases, people have more money to spend on more things; its as though they are wealthier

Question 29

what curve graphically represents an inverse relationship of inflation and unemployment

Answer 29

the phillips curve

Question 30

what are the two primary markets in the circular flow model of an economy?

Answer 30

product and resource markets

Question 31

using the income approach how id GDP calculated?

Answer 31

GDP= Consumption + investment + government spending + net exports

Question 32

what is the index of leading economic indicators?

Answer 32

a weighted index of twelve economic measurements that can indicate the general direction in which economic growth is moving

Question 33

why is an import leak from the money flow

Answer 33

money leaves our country in exchange for product from another country

Question 34

which sector is on the demand side of the factor markets n the circular flow model

Answer 34

the business sector

Question 35

in a nation of subsistence farmers is GDP per capita an accurate measure of quality of life?

Answer 35

probably not

Question 36

explain how consumer sovereignty works

Answer 36

consumers have needs for resources, good, or services, and their demand gets the circular flow model going

Question 37

the decision between guns and butter is a classic example of which basic economic question

Answer 37

what to produce

Question 38

what do firms pay for the factors of production

Answer 38

wages, rents, salaries

Question 39

hw much was the US nominal GDP in 1990

Answer 39

over $5.74 trillion

Question 40

the business cycle is graphed as a measure of changes in _____ over time

Answer 40

GDP

Question 41

how much was the median household income of white household in the IS in 1999

Answer 41

$42,504

Question 42

name the three types of economic indicators

Answer 42

lading indicators, lagging indicators, and concurrent indicators

Question 43

the choice between mass-production and small-scale production is an example of which basic economic question?

Answer 43

how to produce

Question 44

the rate and magnitude of the circular flow can be equated to ____

Answer 44

GDP

Question 45

aggregate demand measures the relationship of ______

Answer 45

rice level to quantity of output in an entire economy

Question 46

the number of new housing permits issued is a (leading/concurrent/lagging) economic indicator

Answer 46

leading

Question 47

if real flow runs counter-clockqise in the circular flow model, in which direction does money flow?

Answer 47

clockwise

Question 48

on a graph of aggregate demand, what does the vertical axis represent?

Answer 48

gross domestic product

Question 49

what is the most meaningful measure of economic growth?

Answer 49

per capita GDP

Question 50

True or false: if people think price levels are going to fall in the future, they spend less now, bringing down aggregate demand

Answer 50

true=in fact, this actually helps lower the price level !!!!!!!!

Question 51

what does it mean for aggregate supply to be in the classical range?

Answer 51

it means that an increase in aggregate demand will result in an equilibruim of higher prices but no greater quantity of economic output

Question 52

between 1990 and 1998 by what percent did real gross domestic product grow in the US

Answer 52

23.10%

Question 53

What provides the "grease" that helps the economy run smoother by making exchanges easier?

Answer 53

money

Question 54

Most day-to-day transactions take place with what form of money?

Answer 54

demand deposits

Question 55

Interest rates are the cost of (consumption or investment)

Answer 55

investment

Question 56

Derived demands are demands for what

Answer 56

factors of production

Question 57

The demand for labor is an example of a ______ demand

Answer 57

derived

Question 58

A farmer buys farmland solely for the purpose of growing wheat. The demand for the (farmland or wheat) is a derived demand

Answer 58

farmland

Question 59

What term refers to the demand for an input?

Answer 59

derived demand

Question 60

The term derived demand refers to (consumer or producer) demand

Answer 60

producer

Question 61

The economic term "rent" refers to the price of a factor of production whose supply is perfectly (elastic or inelastic)

Answer 61

inelastic

Question 62

Explain the difference between the terms "rent" or "rental"

Answer 62

"Rent" is the payment for a factor with a fixed supply, such as land. "Rental" is the price paid for any good or service over a period of time

Question 63

Rent is the price paid for which factor of production

Answer 63

land

Question 64

What economic term refers to payments for labor?

Answer 64

wages

Question 65

What does a producer pay for the use of labor?

Answer 65

wages

Question 66

What does the producer pay for the use of a capital resource?

Answer 66

interest

Question 67

What is the reward for entrepreneurship?

Answer 67

profit

Question 68

What does the producer pay for the use of natural resource?

Answer 68

rent

Question 69

The degree of income inequality in the United States has (increased or decreased) since the beginning of the 20th century

Answer 69

decreased

Question 70

What is a productivity-adjusted wage?

Answer 70

a wage rate based on the number of units produced

Question 71

What does the Lorenz curve measure?

Answer 71

inequality among income classes

Question 72

What is the measurement of output per unit of input?

Answer 72

productivity

Question 73

If a firm improves its productivity, are prices likely to fall?

Answer 73

yes

Question 74

If input remains the same, but output increases, does productivity increase, decrease or stay the same?

Answer 74

it increases

Question 75

What is human capital?

Answer 75

education, skills, and training of laborers