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business
economics 14th global
Questions and Answers of
Economics 14th Global
List the two assumptions underlying the short-run Phillips curve.
If people’s expectations about inflation do not change, the short-run effect of disinflation is rising __________________.
Write the equation for the government budget restraint.
The government can finance its spending by __________________,__________________ ,or __________________.
a period in which real GDP falls Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP B. recession K.
a sustained rise in the average level of prices Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP
the nominal interest rate minus the rate of inflation Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential
the pattern of rising real GDP followed by falling real GDP Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J.
a variable that changes before real output changes Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real
an extremely high rate of inflation Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP B. recession
the unemployment rate that would exist in the absence of cyclical unemployment Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A.
inflation caused by increasing demand for output Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP
a severe, prolonged economic contraction Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP B.
the observed interest rate in the market Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP B.
the percentage of the labor force that is not working Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential
the output produced at the natural rate of unemployment Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential
the employment of workers in jobs that do not utilize their productive potential Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A.
a variable that changes at the same time that real output changes Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J.
inflation caused by rising costs of production Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real GDP
a variable that changes after real output changes Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. business cycle J. potential real
workers who have stopped looking for work because they believe no one will offer them a job Match each term with its correct definition by placing the appropriate letter next to the corresponding
1. a curve that shows the different levels of expenditures on domestic output at different levels of prices Match each term with its correct definition by placing the appropriate letter next to the
2. a vertical line at the potential level of national income Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. wealth effect B.
3. a change in the real value of wealth that causes spending to change when the level of prices changes Match each term with its correct definition by placing the appropriate letter next to the
4. a curve that shows the amount of real GDP produced at different price levels Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A.
5. a change in interest rates that causes investment and therefore aggregate expenditures to change as the level of prices changes Match each term with its correct definition by placing the
6. a change in aggregate expenditures resulting from a change in the domestic price level that changes the price of domestic goods in relation to foreign goods Match each term with its correct
spending on capital goods to be used in producing goods and services Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household
products that a country buys from other countries Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal Reserve
the shortage that results when government spending is greater than revenue Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A.
the situation that exists when imports exceed exports Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal
policy directed toward government spending and taxation Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal
a firm that owns and operates producing units in foreign countries Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K.
the excess that results when government spending is less than revenue Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household
the situation that exists when imports are less than exports Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K.
income transferred from one citizen who is earning income to another citizen who may not be Match each key term with its correct definition by placing the appropriate letter next to the corresponding
the difference between the value of exports and the value of imports Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household
a model showing the flow of output and income from one sector of the economy to another Match each key term with its correct definition by placing the appropriate letter next to the corresponding
one or more persons who occupy a unit of housing Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal Reserve B.
households, businesses, and the international sector Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal
household spending Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal Reserve B. consumption L. fiscal policy
the central bank of the United States Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal Reserve B.
the government Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal Reserve B. consumption L. fiscal policy C.
products that a country sells to other countries Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal Reserve B.
policy directed toward the control of money and credit Match each key term with its correct definition by placing the appropriate letter next to the corresponding numbers.A. household K. Federal
2. How is monetary policy set?
5. Are business cycles related to political elections?
8. How are economic growth rates determined?
2. Discuss how each of the following would serve the functions of money:a. Goldb. Yap stone moneyc. Cigarettesd. Diamonds
4. Why are informal financial markets used in developing countries? Give an example of an informal financial market.
5. First Bank has cash reserves of $200,000, loans of$800,000, and deposits of $1,000,000.a. Prepare a balance sheet for the bank.b. If the bank maintains a reserve requirement of 12 percent, what is
6. Yesterday bank A had no excess reserves. Today it received a new deposit of $5,000.a. If the bank maintains a reserve requirement of 2 percent, what is the maximum loan bank A can make?b. What is
8. What is liquidity? Rank the following assets in order of their liquidity: $10 bill, personal check for $20, savings account with $400 in it, stereo, car, house, travelers’ check.Use the
9. What is the value of M1 in the previous table?
10. What is the value of M2 in the previous table?
1 Which of the following is not one of the functions of money?■a. a medium of exchange■b. a unit of account■c. a resource for production■d. a store of value■e. a standard of deferred payment
2 Which of the following is not a component of the M1 money supply?■a. demand deposits■b. other checkable deposits■c. currency■d. savings accounts■e. travelers’ checks
3 Which of the following is not a transactions account?■a. negotiable order of withdrawal■b. credit union share draft account■c. savings account■d. automated transfer system account■e.
4 Which of the following is not a component of the M2 money supply?■a. retail money market mutual fund balances■b. small-denomination time deposits■c. currency■d. savings deposits■e. large
5 Which of the following statements is true?■a. The laws regulating international banks typically are very restrictive whereas domestic banks go relatively unregulated.■b. Offshore banking,
6 Which of the following statements is false?■a. The FDIC does not permit banks to fail for fear of causing a bank panic.■b. Almost all states permit entry to banks located out of state.■c. A
7 The deposit expansion multiplier will be larger the■a. smaller the reserve requirement.■b. greater the currency drain.■c. greater the percentage of excess reserves held by banks.■d. larger
8 Banks increase the money supply by■a. cashing checks.■b. making loans.■c. providing currency.■d. printing money.■e. printing money and coining currency.
9 A bank has $200,000 in deposits and $10,000 in cash.The reserve requirement is 4 percent. The bank’s required reserves are , and its excess reserves are .■a. $400; $199,600■b. $199,600;
List the four functions of money.
2 List the four components of the M1 money supply.
3 Credit unions offer their members interest-bearing checking accounts called .
4 are nonprofit savings and loan institutions.
5 List the four components of the M2 money supply.
6 Deposits denominated in dollars but held outside the U.S. domestic bank market are called deposits.
deposits are deposits at banks and at savings and loans that earn interest but offer no check-writing privileges.
Small-denomination time deposits are also called _________________-.
combine the deposits of many individuals and invest them in government Treasury bills and other short-term securities.
Thrift institutions include______________ ,,and______________ .
(Domestic, Offshore) banks are usually able to offer better terms to their customers.
Eurodollar transactions are(more risky, less risky) than domestic transactions in the United States because of the lack of regulation and deposit insurance.
A bank occurs when depositors, fearing a bank’s closing, rush to withdraw their funds.
The deposit expansion multiplier equals(formula).
The deposit expansion multiplier tells us the(maximum, minimum) change in total deposits when a new deposit is made.
If people withdraw deposits from banks, occurs, and the deposit expansion multiplier will be less than the reciprocal of the reserve requirement.
Any single bank can lend only up to the amount of its.
Banks increase the money supply by______________
How Banks Create Money The State Bank of Oswald has cash reserves of $5,000, loans of $495,000, and deposits of $500,000. The bank maintains a reserve requirement of 1 percent.a. Calculate this
The Components of the Monetary Aggregates The following table lists the components of the monetary aggregates in billions of dollars.Travelers’ checks 8.1 Savings deposits 1,135.0 Demand deposits
Comment on the following statement: “Globalization is an event of the 1980s and 1990s. Prior to this time, we never had to worry about globalization and its effects.” Appendix
Why has the pace of globalization quickened since the 1950s? Appendix
If you wanted to compare countries on the basis of how globalized they are, how could you construct some numerical measures that would allow a crosscountry comparison? Appendix
What are the major arguments against globalization? Appendix
What are the major arguments in favor of globalization? Appendix
What is the WTO? Where is it located, and what does it do? Appendix
Suppose we find that multinational firms are paying much lower wages in some poor countries than they would have to pay in the United States. Would this be sufficient evidence that these firms are
How can globalization reduce poverty? What does the evidence suggest about globalization and poverty? Appendix
There were several major international financial crises in the 1990s. What role did globalization play in these crises? Appendix
Using a supply and demand diagram, explain how central banks maintain a fixed exchange rate. What can cause an end to the fixed exchange rate regime? Appendix
Using a supply and demand diagram, explain how speculative attacks occur in the foreign exchange market. Appendix
If you worked for a major international bank, forecasting the likelihood of a financial crisis, what key variables would you want to monitor for the countries you are studying? Why would you want to
a situation in which private investors sell domestic currency and buy foreign currency, betting that the domestic currency will be devalued Match each term with the correct definition by placing the
Hong Kong, South Korea, Singapore, and Taiwan—countries that globalized during the 1960s and 1970s and experienced fast economic growth Match each term with the correct definition by placing the
with globalization, countries compete for international investment by offering low or no environmental regulations or labor standards Match each term with the correct definition by placing the
newly industrialized countries Match each term with the correct definition by placing the appropriate letter next to the corresponding number.A. “race to the bottom” C. NICs B. Asian tigers D.
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