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