1. Unit 4 Exam GDP/Inflation/Unemployment Monetary & Fiscal Policy

2. Who creates fiscal policy? Who creates fiscal policy? Government Government Congress & President Congress & President

3. What monetary policy tool is the Fed using when it sells government bonds? What monetary policy tool is the Fed using when it sells government bonds? Open Market Operations Open Market Operations

4. What rate of inflation is a single-digit inflation rate? What rate of inflation is a single-digit inflation rate? Creeping Creeping

5. Due to this, the dollar buys less: Due to this, the dollar buys less: Inflation Inflation

6. What term best describes the period between March and October, 2009? Deflation

7. In how long does a person need to have inquired after a job to be counted a part of the unemployment rate? In how long does a person need to have inquired after a job to be counted a part of the unemployment rate? 1 month 1 month

8. Current GDP is: Current GDP is: $14 trillion $14 trillion

9. Inflation rate of 14% is considered: Inflation rate of 14% is considered: Galloping inflation Galloping inflation

10. To exercise contractionary fiscal policy, what would the government do about the tax rate? To exercise contractionary fiscal policy, what would the government do about the tax rate? Raise it Raise it

11. What effect would an easy money policy have on unemployment? What effect would an easy money policy have on unemployment? Lower it Lower it

12. To contract the money supply and lower inflation, how would the FOMC conduct open market operations? To contract the money supply and lower inflation, how would the FOMC conduct open market operations? Sell government bonds Sell government bonds

13. Unemployment during a recession is most likely due to: Unemployment during a recession is most likely due to: Cyclical unemployment Cyclical unemployment

14. An unemployment rate considered to have reached full employment: An unemployment rate considered to have reached full employment: ~ 5% ~ 5%

15. What effect does raising the reserve requirement have on the inflation rate? What effect does raising the reserve requirement have on the inflation rate? Lowers it Lowers it

16. What rate of inflation exists in the US? Creeping What rate of inflation exists in Zimbabwe? Hyper inflation What rate of inflation exists in Syria? Galloping

17. How can the Fed use the discount rate to stimulate GDP growth? How can the Fed use the discount rate to stimulate GDP growth? Lower it Lower it

18. When was the Federal Reserve system created? When was the Federal Reserve system created? 1913 1913

19. How many federal reserve districts does America have? How many federal reserve districts does America have? 12 12

20. How many people sit on the Fed’s Board of Governors? How many people sit on the Fed’s Board of Governors? 7

21. What Fed entity sets monetary policy? What Fed entity sets monetary policy? Federal Open Market Committee Federal Open Market Committee FOMC FOMC

22. Who is the current Fed Chairman? Who is the current Fed Chairman? Ben Bernanke Ben Bernanke

23. What is our current unemployment rate? What is our current unemployment rate? 9.9% 9.9%

24. Which of the following is counted in the unemployment rate? Which of the following is counted in the unemployment rate? Fred who works part time but needs fulltime work Fred who works part time but needs fulltime work Paul who does not work, but lives off his dad’s wealth Paul who does not work, but lives off his dad’s wealth Bob who lost his Job yesterday and has already begun interviewing with Target Bob who lost his Job yesterday and has already begun interviewing with Target Bob Bob

25. Unemployment due to teens looking for their first job: Unemployment due to teens looking for their first job: Frictional unemployment Frictional unemployment

26. Unemployment due to a lawyer deciding to become a truck driver: Unemployment due to a lawyer deciding to become a truck driver: Frictional unemployment Frictional unemployment

27. Employment in what type of industries are most affected by recessions? Employment in what type of industries are most affected by recessions? Those selling big ticket items Those selling big ticket items ie: boats, cars etc. ie: boats, cars etc.

28. What is the point in the business cycle just before recovery? What is the point in the business cycle just before recovery? Trough Trough

29. What’s another word for the recovery phase of the business cycle? What’s another word for the recovery phase of the business cycle? Expansionary phase Expansionary phase

30. What often happens to workers laid off during the recessionary phase when the economy begins to recover? What often happens to workers laid off during the recessionary phase when the economy begins to recover? Rehired Rehired

31. What type of unemployment accounts for layoffs in the banking industry when ATM machines increasingly became the norm? What type of unemployment accounts for layoffs in the banking industry when ATM machines increasingly became the norm? Technological unemployment Technological unemployment

32. A hurricane wipes out 2,000 acres of orange grove land in Florida. Fruit harvesters hit the unemployment lines. Unemployment increases due to: A hurricane wipes out 2,000 acres of orange grove land in Florida. Fruit harvesters hit the unemployment lines. Unemployment increases due to: Seasonal unemployment Seasonal unemployment

33. The dollar value of the final goods and services produced within a country’s borders within a given year: The dollar value of the final goods and services produced within a country’s borders within a given year: GDP GDP

34. What economic indicator is the measure of a nation’s output? What economic indicator is the measure of a nation’s output? GDP GDP

35. What indicator reflects a nation’s production capacity? What indicator reflects a nation’s production capacity? GDP GDP

36. Which IS included in calculating GDP? Which IS included in calculating GDP? 1. Sugar purchased by Betty Crocker 2. Tires purchased by Ford Motors Corp. 3. DVDs purchased by a vacationer from a Chinese street vender in Hong Kong 4. Cucumbers purchased at the Farmer’s Market #4 #4

37. Which is included in GDP? Which is included in GDP? 1. Concert tickets purchased on e-bay 2. Music downloaded illegally 3. Flowers purchased online 4. A home-made dress #3 #3

38. What modification of nominal GDP is used to allow economists to compare one nation’s worker’s productivity to another nation’s? What modification of nominal GDP is used to allow economists to compare one nation’s worker’s productivity to another nation’s? Per capita GDP Per capita GDP

39. What economic indicator is a measurement of the nation’s income? What economic indicator is a measurement of the nation’s income? GNP GNP

40. What economic indicator applies to the following scenario? What economic indicator applies to the following scenario? The dollar value of production from a foreign plant making power tools in New Jersey The dollar value of production from a foreign plant making power tools in New Jersey GDP GDP

41. What economic indicator applies to the following scenario? What economic indicator applies to the following scenario? Martha Stewart’s clothing line manufactured in sweat shops in Indonesia and shipped back to the US Martha Stewart’s clothing line manufactured in sweat shops in Indonesia and shipped back to the US GNP GNP

42. What type of fiscal policy does the graph below suggest? What type of fiscal policy does the graph below suggest? Expansionary Expansionary

43. Inflation rates in Germany during the Great Depression: Inflation rates in Germany during the Great Depression: Hyperinflation Hyperinflation

44. Theory of inflation where demand exceeds supply: Theory of inflation where demand exceeds supply: Demand-pull theory Demand-pull theory

45. Cause of inflation wherein the government is at fault for the excessive demand: Cause of inflation wherein the government is at fault for the excessive demand: Deficit spending Deficit spending

46. What happens to the general price level when expansionary monetary policy injects too much money into the economy? What happens to the general price level when expansionary monetary policy injects too much money into the economy? Increases Increases

47. What product price increase would most broadly influence the general price level? What product price increase would most broadly influence the general price level? Oil Oil

48. Who is most hurt by inflation? Who is most hurt by inflation? Those on fixed incomes Those on fixed incomes

49. What type of policy is being exercised by President Obama to pull the U.S. out of the recession? What type of policy is being exercised by President Obama to pull the U.S. out of the recession? Expansionary fiscal policy Expansionary fiscal policy

50. How do Republicans generally prefer to exercise expansionary fiscal policy? How do Republicans generally prefer to exercise expansionary fiscal policy? Tax cuts Tax cuts

51. How do Democrats generally prefer to exercise expansionary fiscal policy? How do Democrats generally prefer to exercise expansionary fiscal policy? Spending increases Spending increases

52. How would a Democrat most likely prefer to exercise contractionary fiscal policy? How would a Democrat most likely prefer to exercise contractionary fiscal policy? Tax hikes (especially on the wealthy) Tax hikes (especially on the wealthy)

53. How would a Republican likley prefer to exercise contractionary fiscal policy? How would a Republican likley prefer to exercise contractionary fiscal policy? Spending cuts Spending cuts

54. What economist is most associated with advocating fiscal policy tools as a way to end the Great Depression? What economist is most associated with advocating fiscal policy tools as a way to end the Great Depression? John Maynard Keynes John Maynard Keynes

55. When the FOMC decides to counter a recession with loose or easy money policy, how would it use its open market operations? When the FOMC decides to counter a recession with loose or easy money policy, how would it use its open market operations? Buy govt bonds from member banks Buy govt bonds from member banks

56. Why does lowering the discount rate lead to lower bank interest rates? Why does lowering the discount rate lead to lower bank interest rates? More willing to lend up to reserve requirement More willing to lend up to reserve requirement

57. What cause of inflation can be the result of the Fed buying govt. bonds from member banks? What cause of inflation can be the result of the Fed buying govt. bonds from member banks? Excessive monetary growth Excessive monetary growth

58. Poverty/Stock Market/Labor

59. What is the ultimate power of a union? What is the ultimate power of a union? The ability to go on strike The ability to go on strike

60. Which is NOT a limit on free trade? Which is NOT a limit on free trade? 1. Embargo 2. Quotas 3. WTO 4. Tariff

61. What percent of American poor remain poor over time? What percent of American poor remain poor over time? 5% 5%

62. How much of the poor move into the richest 1/5 of the income distribution? How much of the poor move into the richest 1/5 of the income distribution? 1/3 or 33% 1/3 or 33%

63. What’s it called when stock prices are on the rise? What’s it called when stock prices are on the rise? A bull market A bull market

64. One way to get a sense of how the stock market is doing generally, is to look at the: One way to get a sense of how the stock market is doing generally, is to look at the: 1. NYSE 2. DOW

65. A contractually binding solution to a labor dispute provided by an impartial third party is the result of: A contractually binding solution to a labor dispute provided by an impartial third party is the result of: arbitration arbitration

66. When a country refuses to trade with another country for political purposes, it has placed an ____________ on that country. When a country refuses to trade with another country for political purposes, it has placed an ____________ on that country. embargo embargo

67. If one country can produce a product at a lower opportunity cost than the other country, it is said to have a(n): If one country can produce a product at a lower opportunity cost than the other country, it is said to have a(n): Comparative advantage Comparative advantage

68. There are two ways to make money off the stock market. One is to buy low and sell high. The other is to hold on to your investments and collect: There are two ways to make money off the stock market. One is to buy low and sell high. The other is to hold on to your investments and collect: dividends dividends

69. What is happening to stock prices in a bear market? What is happening to stock prices in a bear market? falling falling

70. What is a tax on dividends called? What is a tax on dividends called? Capital gains tax Capital gains tax