More More Review Questions Flashcards
According to the AS/AD model, an expansionary monetary policy:
Decreases interest rates, raises investment, and increases income.
Why are financial sector crisis scarier than collapses in other sectors of the economy?
If the financial sector fails, it can bring the whole exonomy down with it.
The two main causes of a bubble are:
Herding and leverage
The 2008 financial crisis was caused latterly by:
A bursting of the housing market bubble
The government has bailed out homeowners who are in danger of foreclosure. However future homeowners may deduce that the government will again bail them out in the case of future economic turmoil. The government inadvertently has created what is known as:
Moral hazard
A budget deficit is defined as:
A shortfall of revenues compared to expenditures
A cyclical deficit is the portion of the deficit that exists when:
The economy is beneath potential income
If an economy is operating at potential output:
Any surplus would be a structural surplus
Government debt is defined as:
Accumulated deficits minus accumulated surpluses
Debt is measured relative to GDP because:
The ability of a country to pay off its debt depends on its productive capacity.
The I.S. Debt to GDP ratio in 2013 was approximately:
100 percent
If a $100 billion economy is growing at a real rate of 5% a year and there is no inflation what must the government do to maintain a constant debt to GDP ratio?
Run a deficit
Underemployment includes people:
Who are working part time, or not using all their skills, at a full time job
The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions is:
Called the target rate of unemployment
Scarcity exists because ?
New wants continue to develop and resources available to meet them are limited
