Exam 2

Question 0

What are three primary goals of macroeconomic policy

Answer 0

Stable prices, low unemployment, and economic growth

Question 1

What methods does the Federal reserve used to influence the supply of money in the economy

Answer 1

Change discount rate
change reserve ratio
buy and sell bonds

Question 2

What does the term float referred to in monetary policy

Answer 2

The time it takes for checks to be processed and cleared

Question 3

What is the difference between monetary and physical policy

Answer 3

Monetary: monetary authority controls the supply of money. Often targets inflation rate. Contributes to economic growth and stability
Fiscal: Government decides on the taxes that it collects, transfer payments it gives out, or the goods and services that it purchases.

Question 4

Define GDP

Answer 4

Gross doMestic product. Most common measure of magnitude of the economic flow, a measure of the total expenditures for final goods and services within a given time period

Question 5

What is a primary reason given for the great depression

Answer 5

Stock market crashed

Question 6

What is the primary differences between classical and keynesian economic thought

Answer 6

Key didn’t think economy would self correct

classical thought economy would self correct

Question 7

What are the four factors of production

Answer 7

Land labor capital and management

Question 8

What are the two sectors that make up circular flow of income

Answer 8

Household and business

Question 9

What are the two markets that make up the circular flow of income

Answer 9

Products and factors of production

Question 10

What is the difference between nominal values in real values

Answer 10

Nominal is measured in current dollars real is measured in constant dollars

Question 11

What are the two effects that cause the law of demand to be true

Answer 11

Substitution effect and real income affect

Question 12

Define utility

Answer 12

Satisfaction gained from consuming or acquiting a good or service

Question 13

Define marginal utility

Answer 13

The additional utility gained from consuming one additional unit of a good

Question 14

What are the assumptions for conducting a consumer demand model

Answer 14

Rational behavior (more >less) consumer has budget constraint, consumer can express preferences, consumption include utility from purchasing, consumer seeks to maximize utility

Question 15

What are the indifference curves and budget constraints

Answer 15

Indifference curve is an alternate model of consumer behavior. Same assumptions as for the marginal utility model
Budget constraint is how much money you have

Question 16

What are the factors that can shift demand curves

Answer 16

Tastes and preferences, income or budget, price of substitutes and complements, demographics, and exports

Question 17

To find short run and long-run decision-making

Answer 17

Short: some variables are fixed
long: everything is a variable

Question 18

What are the common factors of perfect competition

Answer 18

Large number of small producers, Homogenous product, no limit on entry/exit, perfect knowledge, and medical resources