Download Monetary Policy

Unit 4 Exam
GDP/Inflation/Unemployment
Monetary & Fiscal Policy

Who creates fiscal policy?
Government
 Congress & President


What monetary policy tool is the Fed using
when it sells government bonds?

Open Market Operations

What rate of inflation is a single-digit
inflation rate?

Creeping

Due to this, the dollar buys less:

Inflation
What term best describes the period between March and October, 2009?
Deflation

In how long does a person need to have
inquired after a job to be counted a part
of the unemployment rate?

1 month

Current GDP is:

$16 trillion

Inflation rate of 14% is considered:

Galloping inflation

To exercise contractionary fiscal policy,
what would the government do about the
tax rate?

Raise it

What effect would an easy money policy
have on unemployment?

Lower it

To contract the money supply and lower
inflation, how would the FOMC conduct
open market operations?

Sell government bonds

Unemployment during a recession is most
likely due to:

Cyclical unemployment

An unemployment rate considered to have
reached full employment:

~ 5%

What effect does raising the reserve
requirement have on the inflation rate?

Lowers it
What rate of inflation exists in Syria?
Galloping
What rate of inflation exists in the US?
Creeping
What rate of inflation exists in Zimbabwe?
Hyper inflation

How can the Fed use the discount rate to
stimulate GDP growth?

Lower it

When was the Federal Reserve system
created?

1913

How many federal reserve districts does
America have?

12

How many people sit on the Fed’s Board
of Governors?

7

What Fed entity sets monetary policy?
Federal Open Market Committee
 FOMC


Who is the current Fed Chairman?

Ben Bernanke

What is our current unemployment rate?

5%

Which of the following is counted in the
unemployment rate?
 Fred
who works part time but needs fulltime
work
 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

Unemployment due to teens looking for
their first job:

Frictional unemployment

Unemployment due to a lawyer deciding
to become a truck driver:

Frictional unemployment

Employment in what type of industries are
most affected by recessions?
Those selling big ticket items
 ie: boats, cars etc.


What is the point in the business cycle just
before recovery?

Trough

What’s another word for the recovery
phase of the business cycle?

Expansionary phase

What often happens to workers laid off
during the recessionary phase when the
economy begins to recover?

Rehired

What type of unemployment accounts for
layoffs in the banking industry when ATM
machines increasingly became the norm?

Technological unemployment

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

The dollar value of the final goods and
services produced within a country’s
borders within a given year:

GDP

What economic indicator is the measure of
a nation’s output?

GDP

What indicator reflects a nation’s
production capacity?

GDP

Which IS included in calculating GDP?
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
1.

#4

Which is included in GDP?
Concert tickets purchased on e-bay
2. Music downloaded illegally
3. Flowers purchased online
4. A home-made dress
1.

#3

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

What economic indicator is a
measurement of the nation’s income?

GNP

What economic indicator applies to the
following scenario?
 The
dollar value of production from a foreign
plant making power tools in New Jersey

GDP

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

GNP

Inflation rates in Germany during the
Great Depression:

Hyperinflation

Theory of inflation where demand exceeds
supply:

Demand-pull theory

Who is most hurt by inflation?

Those on fixed incomes

Cause of inflation wherein the government
is at fault for the excessive demand:

Deficit spending

What type of fiscal policy does the graph
below suggest?

Expansionary

What happens to the general price level
when expansionary monetary policy
injects too much money into the
economy?

Increases

What product price increase would most
broadly influence the general price level?

Oil

What type of policy is being exercised by
President Obama to pull the U.S. out of
the recession?

Expansionary fiscal policy

How do Republicans generally prefer to
exercise expansionary fiscal policy?

Tax cuts

How do Democrats generally prefer to
exercise expansionary fiscal policy?

Spending increases

How would a Democrat most likely prefer
to exercise contractionary fiscal policy?

Tax hikes (especially on the wealthy)

How would a Republican likley prefer to
exercise contractionary fiscal policy?

Spending cuts

What economist is most associated with
advocating fiscal policy tools as a way to
end the Great Depression?

John Maynard Keynes

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

Why does lowering the discount rate lead
to lower bank interest rates?

More willing to lend up to reserve
requirement

What cause of inflation can be the result
of the Fed buying govt. bonds from
member banks?

Excessive monetary growth
Poverty/Stock Market/Labor
What is the ultimate power of a union?
 The ability to go on strike


1.
2.
3.
4.
Which is NOT a limit on free trade?
Embargo
Quotas
WTO
Tariff
What percent of American poor remain
poor over time?
 5%

How much of the poor move into the
richest 1/5 of the income distribution?
 1/3 or 33%

What’s it called when stock prices are on
the rise?
 A bull market


1.
2.
One way to get a sense of how the stock
market is doing generally, is to look at
the:
NYSE
DOW
A contractually binding solution to a labor
dispute provided by an impartial third
party is the result of:
 arbitration

When a country refuses to trade with
another country for political purposes, it
has placed an ____________ on that
country.
 embargo

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

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

What is happening to stock prices in a
bear market?
 falling

What is a tax on dividends called?
 Capital gains tax


What international organization both
replaced GATT and encourages trade in
Third world nations?
WTO
 World Trade Organization


Which free trade agreement benefited
Mexico, Canada, and the U.S.?
NAFTA
 North American Free Trade Agreement


Who wants most to protect American
jobs?

Protectionists

Who fears US dependence on foreign
markets most?

Protectionists

Who most appreciates lower prices from
foreign markets?

Free traders

Those who promote lowering trade
barriers are:

Free traders