Central Banking and Currency Demand Quiz
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Questions and Answers

Which approach is used to calculate GDP by summing up the value added by all industries in the economy?

  • Production Approach (correct)
  • Income Approach
  • Expenditure Approach
  • None of the above

    • What is the biggest sector in countries like Austria?

  • Primary Sector - Agriculture
  • Secondary Sector - Industry and Construction
  • Tertiary Sector - Services (correct)
  • None of the above

    • Why is real GDP more meaningful for time comparisons?

  • Price effects are adjusted for in real GDP (correct)
  • Only increases in the production of goods and services are measured in real GDP
  • Real GDP changes at constant prices
  • Nominal GDP changes at current prices

    • What are the two main drivers for economic growth?

    <p>Increases in work volume and labor productivity</p> Signup and view all the answers

    Which one of these is a typical topic in macroeconomics?

    <p>Output and inflation</p> Signup and view all the answers

    What is a fallacy of composition?

    <p>The assumption that what is true for one member of a group is true for all members</p> Signup and view all the answers

    Which one of these is an example of a market failure?

    <p>Monopoly in the market</p> Signup and view all the answers

    What happens if everyone saves more money simultaneously?

    <p>Reduced economic growth</p> Signup and view all the answers

    What are the effects of unemployment?

    <p>Losses in human capital</p> Signup and view all the answers

    Based on the text, which type of unemployment is caused by a shortage of jobs during recessions or downturns?

    <p>Cyclical (demand deficient)</p> Signup and view all the answers

    How is full employment defined?

    <p>A state where all eligible individuals can find jobs at prevailing wage rates</p> Signup and view all the answers

    In the simple neoclassical model, how is the (real) wage determined?

    <p>Exclusively by labor demand and labor supply</p> Signup and view all the answers

    According to the Keynesian model, why can there be persistent unemployment?

    <p>Insufficient aggregate demand</p> Signup and view all the answers

    In the Keynesian model, why don't firms invest more if saving is increased?

    <p>Increased saving leads to reduced consumption</p> Signup and view all the answers

    What are passive labor market policies?

    <p>Unemployment benefits</p> Signup and view all the answers

    According to the heterodox and orthodox view, what is money?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is NOT a duty of the central bank?

    <p>Operating payment systems</p> Signup and view all the answers

    What is the purpose of legal tender laws?

    <p>To create demand for a currency</p> Signup and view all the answers

    What is the topmost layer of the pyramid of liabilities?

    <p>Banknotes and coins</p> Signup and view all the answers

    What is the difference between stable inflation and accelerating inflation?

    <p>Stable inflation is a continuous rise in the price level, while accelerating inflation is a one-off price rise</p> Signup and view all the answers

    Which of the following is a fiscal policy measure to combat the effects of inflation?

    <p>One time payments</p> Signup and view all the answers

    What is one of the fiscal policies against the causes of inflation mentioned in the text?

    <p>Investments in renewable energy production</p> Signup and view all the answers

    Why might deficit rules be problematic according to the text?

    <p>They prevent necessary investments</p> Signup and view all the answers

    What does the text mention as a need for massive investments?

    <p>Climate crisis</p> Signup and view all the answers

    What was the rationale behind choosing the 60% public debt threshold according to the text?

    <p>Unrealistic growth assumptions</p> Signup and view all the answers

    What do countries in Europe require different degrees of according to the text?

    <p>Investments for convergence</p> Signup and view all the answers

    Which one of these is the most correct?

    <p>Fiscal policy refers to government decisions on taxation and spending, while monetary policy involves central bank actions.</p> Signup and view all the answers

    Which one of these is the most correct?

    <p>Neoclassical economics assumes that markets self-regulate and reach equilibrium, while Keynesian economics believes that government intervention is necessary to stabilize the economy during recessions.</p> Signup and view all the answers

    Which one of these is the most correct?

    <p>Stocks represent a quantity or accumulation of something at a specific point in time, while flows refer to the rate at which that quantity changes over a period of time.</p> Signup and view all the answers

    Which one of these is the most correct?

    <p>GDP measures the total value of goods and services produced within a country's borders during a specific time period, including consumption, investment, government spending, and net exports.</p> Signup and view all the answers

    Study Notes

    GDP Approaches

    • Gross Domestic Product (GDP) can be calculated by summing the value added by all industries within an economy.

    Economic Sectors

    • In countries like Austria, the largest sector is typically the service sector.

    Real GDP

    • Real GDP, adjusted for inflation, provides a more accurate basis for comparing economic performance over time.

    Economic Growth Drivers

    • Two main drivers of economic growth are technological advancement and increases in capital investment.

    Macroeconomics Topics

    • Macroeconomics commonly addresses issues like inflation, unemployment, and economic output.

    Fallacy of Composition

    • This fallacy occurs when it is assumed that what is true for one part is also true for the whole.

    Market Failures

    • An example of market failure is when externalities, like pollution, lead to inefficient market outcomes.

    Collective Saving Impact

    • If everyone saves more money at the same time, it can lead to a decrease in overall demand, potentially causing an economic downturn.

    Effects of Unemployment

    • Unemployment can result in reduced income, decreased consumer spending, and negative impacts on mental health.

    Types of Unemployment

    • Cyclical unemployment arises during economic recessions when there is a shortage of jobs.

    Full Employment Definition

    • Full employment is defined as the lowest level of unemployment that an economy can sustain without causing inflation.

    Wage Determination

    • In the simple neoclassical model, (real) wages are determined by the supply and demand for labor.

    Keynesian Perspective on Unemployment

    • The Keynesian model suggests that persistent unemployment can occur due to insufficient aggregate demand.

    Firm Investment and Saving

    • According to the Keynesian model, firms may not invest more despite increased savings because they anticipate weak demand.

    Passive Labor Market Policies

    • These policies are designed to support unemployed individuals without actively creating jobs, such as providing unemployment benefits.

    Concepts of Money

    • The heterodox view sees money as a social construct, while the orthodox view treats it as a tool for facilitating trade.

    Central Bank Duties

    • Duties of the central bank typically exclude direct involvement in the actual production of goods and services.
    • Legal tender laws establish a currency that must be accepted if offered in payment of a debt.

    Pyramid of Liabilities

    • The topmost layer of the pyramid of liabilities consists of central bank currency.

    Inflation Types

    • Stable inflation implies a consistent rate over time, whereas accelerating inflation refers to rapidly increasing prices.

    Fiscal Policy Against Inflation

    • One fiscal policy measure to combat inflation is reducing government spending.

    Deficit Rules Concerns

    • Deficit rules may be problematic as they can limit the government’s ability to invest in growth during economic downturns.

    Investment Needs

    • The text mentions a critical need for massive investments in infrastructure to support economic development.

    Public Debt Threshold Rationale

    • The 60% public debt threshold was chosen as a guideline to promote fiscal sustainability among EU countries.

    European Economic Requirement

    • Countries in Europe require varying degrees of fiscal and monetary coordination to maintain economic stability.

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    Description

    Test your knowledge of central banking and currency demand in this quiz. Learn about the relationship between taxes, government currency, legal tender laws, and the duties of a central bank.

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