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Ch. 11, 12, 13 and 14 Test.

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Presentation on theme: "Ch. 11, 12, 13 and 14 Test."— Presentation transcript:

1 Ch. 11, 12, 13 and 14 Test

2 What is the branch of the economy that deals with the economy as a whole?
Answer: Macroeconomics

3 What is the dollar value of all final goods and services produced in a country during a one year period called? Answer: GDP

4 Examples of this category EXCLUDED from the GDP are buying a used car or an older home. What is this category? Answer: Secondhand Sales

5 Examples of this category EXCLUDED from the GDP are doing your own home repairs or a housekeeper paid under the table. Answer: Nonmarket Transactions

6 Examples of this category EXCLUDED from the GDP are gambling, garage sales or selling drugs.
Answer: Underground Economy

7 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

8 What are the two reasons why we measure GDP?
Answer: To know how the economy is performing and how to plan for the future.

9 How often is GDP calculated?
Answer: Quarterly (every 3 months)

10 What are the ups (increases) and downs (decreases) of the GDP known as?
Answer: The Business Cycle

11 During an Expansion what is the GDP doing?
Answer: Going up

12 What are the two phases of the business cycle?
Answer: Contraction (recession) and expansion.

13 What are the high AND low GDP points in the business cycle?
Answer: Peak = High Trough = Low

14 What happens to unemployment during a recession?
Answer: It increases

15 Inflation (or Deflation) is measured looking at the ?
Answer: CPI (Consumer Price Index)

16 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.

17 What happens to consumer’s purchasing power due to inflation?
Answer: The dollar buys less and the consumer’s purchasing power is reduced.

18 If your doing a job for which you are WAY overqualified you are considered?
Answer: Underemployed

19 When a person is actively looking for another job after losing their current job, they are considered??? Answer: Unemployed

20 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

21 What document gives Congress Power over money?
Answer: The Constitution

22 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)

23 What protects your money in a bank and how much is protected?
Answer: Federal Deposit Insurance Corporation (FDIC) = $250,000

24 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)

25 What are the four characteristics of money?
Answer: Portable (easy to carry) Durable (lasts) Limited Supply (so valuable) Divisible (can give change)

26 What will happen in a barter economy due to a “mutual coincidence of wants”?
Answer: Trade

27 What is the deliberate control of the Money Supply by the FED called?
Answer: Monetary Policy

28 3 Purposes the FED controls the money supply is to????
Answer: Prevent Recession Reduce Unemployment Fight High Inflation

29 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.

30 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. ))

31 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

32 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.

33 Recession and unemployment are the result of what factor?
Answer: Not enough money in circulation.

34 What is a nonbank financial institution that is set up to provide financial protection for survivors of the insured called? Answer: Life insurance company

35 What type of investment poses the most risk for an investor?
Answer: A Junk Bond (high yield)

36 What two factors are important when considering an investment?
Answer: Risk and return

37 The Standard and Poor’s 500 is a popular benchmark of stock performance. What is another example?
Answer: Dow Jones Industrial Average

38 What is a bond issued by the state and local government?
Answer: Municipal Bonds

39 What is the tax deferred investment and savings plan that acts as a personal pension fund for employees? Answer: 401K

40 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

41 What is the bank investment that gives you a higher interest rate over a length of time called?
Answer: Certificate of Deposit

42 What is a non-transferable bond issued by the federal government?
Answer: Government Savings Bonds

43 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

44 What type of unemployment is due to weather?
Answer: Seasonally unemployment

45 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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