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Ch. 11, 12, 13 and 14 Test
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What is the branch of the economy that deals with the economy as a whole?
Answer: Macroeconomics
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What is the dollar value of all final goods and services produced in a country during a one year period called? Answer: GDP
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Examples of this category EXCLUDED from the GDP are buying a used car or an older home. What is this category? Answer: Secondhand Sales
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Examples of this category EXCLUDED from the GDP are doing your own home repairs or a housekeeper paid under the table. Answer: Nonmarket Transactions
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Examples of this category EXCLUDED from the GDP are gambling, garage sales or selling drugs.
Answer: Underground Economy
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This category that is EXCLUDED from the GDP are goods used to make other products already counted in the GDP. What is this category? Answer: Intermediate Products
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What are the two reasons why we measure GDP?
Answer: To know how the economy is performing and how to plan for the future.
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How often is GDP calculated?
Answer: Quarterly (every 3 months)
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What are the ups (increases) and downs (decreases) of the GDP known as?
Answer: The Business Cycle
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During an Expansion what is the GDP doing?
Answer: Going up
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What are the two phases of the business cycle?
Answer: Contraction (recession) and expansion.
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What are the high AND low GDP points in the business cycle?
Answer: Peak = High Trough = Low
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What happens to unemployment during a recession?
Answer: It increases
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Inflation (or Deflation) is measured looking at the ?
Answer: CPI (Consumer Price Index)
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The CPI measures a ________ Which is a representative selection of commonly purchased goods and services. Answer: The CPI measures a MARKET BASKET which is a representative selection of commonly purchased goods and services.
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What happens to consumer’s purchasing power due to inflation?
Answer: The dollar buys less and the consumer’s purchasing power is reduced.
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If your doing a job for which you are WAY overqualified you are considered?
Answer: Underemployed
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When a person is actively looking for another job after losing their current job, they are considered??? Answer: Unemployed
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If you choose to be a stay at home parent, or give up looking for a job, or are Disabled you are NOT unemployed because you are not: Answer: In the Labor Force
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What document gives Congress Power over money?
Answer: The Constitution
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What was the ancient type of money where the money could both be used for a purpose and to spend?
Answer: Commodity money (arrowheads for example)
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What protects your money in a bank and how much is protected?
Answer: Federal Deposit Insurance Corporation (FDIC) = $250,000
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What are the three functions of money?
Answer: 1) Medium of Exchange (widely accepted) 2) Measure of Value (know value so everything can be valued in money terms Ex: U.S. uses dollars and cents 3) Store of Value (spend in future)
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What are the four characteristics of money?
Answer: Portable (easy to carry) Durable (lasts) Limited Supply (so valuable) Divisible (can give change)
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What will happen in a barter economy due to a “mutual coincidence of wants”?
Answer: Trade
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What is the deliberate control of the Money Supply by the FED called?
Answer: Monetary Policy
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3 Purposes the FED controls the money supply is to????
Answer: Prevent Recession Reduce Unemployment Fight High Inflation
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Fill in all the blanks: Since banks can only loan out their _______ reserves, the Fed can lower the __________ to allow banks to make more loans and to make a ________ money supply. Since banks can only loan out their EXCESS reserves, the Fed can lower the RESERVE REQUIREMENT to allow banks to make more loans and to make a LARGER money supply.
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If the Fed is worried about high inflation, what would the Fed do?
Answer: Raise the interest rates. ((Makes it harder to borrow money and slows inflation/economy. ))
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Describes EASY Monetary Policy
Interest Rates falling lead to more people borrowing AND spending which stimulates the economy and Expands the $ supply. Describes ________ Monetary Policy Answer: Describes EASY Monetary Policy
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Answer: It regulates and supervises banks.
Which factor is missing about the Federal Reserve System: - Maintains the money supply - Acts as the government’s bank - Board of Directors are appointed by the President - ???? Which one is missing???? Answer: It regulates and supervises banks.
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Recession and unemployment are the result of what factor?
Answer: Not enough money in circulation.
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What is a nonbank financial institution that is set up to provide financial protection for survivors of the insured called? Answer: Life insurance company
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What type of investment poses the most risk for an investor?
Answer: A Junk Bond (high yield)
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What two factors are important when considering an investment?
Answer: Risk and return
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The Standard and Poor’s 500 is a popular benchmark of stock performance. What is another example?
Answer: Dow Jones Industrial Average
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What is a bond issued by the state and local government?
Answer: Municipal Bonds
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What is the tax deferred investment and savings plan that acts as a personal pension fund for employees? Answer: 401K
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What are regular payments from an employer to someone who has worked a certain number of years, reached a certain age, or has suffered an injury called? Answer: A pension
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What is the bank investment that gives you a higher interest rate over a length of time called?
Answer: Certificate of Deposit
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What is a non-transferable bond issued by the federal government?
Answer: Government Savings Bonds
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When calculating the unemployment rate, you divide the ___
When calculating the unemployment rate, you divide the ___?????________ by the civilian labor force. What is ??? Answer: Number of unemployed persons
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What type of unemployment is due to weather?
Answer: Seasonally unemployment
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What type of unemployment is tied directly to the business cycle and lay offs occur during a recession? Answer: Cyclical unemployment
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