88 Questions
Which of the following is a type of inflation that is generally defined as price increases of 50% or more per month?
Hyperinflation
What is the economic situation defined by an inefficient distribution of goods and services in the free market called?
Market failure
What is the percentage of workers searching for work called?
Unemployment rate
Which of the following is a type of unemployment that occurs when people change their jobs?
Frictional unemployment
What is the formula for calculating Gross Domestic Product (GDP)?
C+I+G+X
Which of the following is a type of inflation that is characterized by a general decline in prices for goods and services?
Deflation
What is the measure used by economists to calculate the economy's inflation rate?
Consumer Price Index (CPI)
Which of the following is a type of unemployment that occurs when workers' skills do not match the jobs available?
Structural unemployment
What is the term used to describe the underuse of a worker because the job does not utilize their skills, is part-time, or leaves them idle?
Underemployed
What is the term used to describe the material well-being of the average person in a given population?
Standard of living
What is the term used to describe the economic situation defined by an inefficient distribution of goods and services in the free market?
Market failure
What is the term used to describe a cost that spills over to a third party in an economic transaction?
Negative externality
What is the term used to describe a benefit that spills over to a third party in an economic transaction?
Positive externality
Which of the following is a tool used by the Federal Reserve for monetary policy?
Open market operations
What is the purpose of the discount rate set by the Federal Reserve?
To influence the amount of loanable funds banks have available
What is the reserve ratio?
The minimum percentage of bank deposits required to be available for withdrawal
Which of the following is a tool used for fiscal policy?
Taxation
What is the goal of supply-side economics?
To provide consumers with more products and service options
What is the goal of demand-side economics?
To reduce taxes and increase consumer spending
What is fractional reserve banking?
A system in which only a fraction of bank deposits are required to be available for withdrawal
What is globalization?
A system in which products, technology, information, and jobs spread across national borders and cultures
What is GATT?
The General Agreement on Tariffs and Trade, the first trade organization with the purpose of reducing trade barriers
What is the purpose of international trade?
To reduce trade barriers
Which of the following is a trade barrier that seeks to limit all trade from a nation?
Embargoes
What is the purpose of the World Trade Organization (WTO)?
To replace GATT in 1995
Which of the following refers to goods a country buys from another country?
Imports
What is the term used to describe a situation where a country's exports are higher than its imports?
Surplus
What is the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports?
Protectionism
Which action does the Federal Reserve commonly take to enact a tight-money policy?
Increasing reserve requirements
How does selling bonds on the open market affect bond prices and interest rates?
Bond prices fall and interest rates increase
What is the effect of higher interest rates on lending?
Higher interest rates discourage lending
How does less lending affect aggregate demand?
Less lending decreases aggregate demand
What is the effect of decreased aggregate demand on GDP growth?
Decreased aggregate demand decreases growth in GDP
What is the effect of decreased aggregate demand on the general price level?
Decreased aggregate demand lowers the general price level
What is the Fed's most common action to enact a tight-money policy?
Selling bonds on the open market
What is the potential consequence of contracting the money supply too much?
Aggregate demand may decrease to a level where unemployment increases
What does the Fed aim to decrease by enacting a tight-money policy?
Reserves available for loans
What is the potential consequence of decreasing reserves available for loans?
Aggregate demand decreases, GDP growth decreases, and the general price level lowers
Which states have no individual income tax?
Alaska, Florida, South Dakota, Texas, and Washington
What is the range of corporate income tax rates among states?
One percent to twelve percent
Which types of taxes do most states levy?
Income taxes, corporate income taxes, sales taxes, and various fees
What is a balanced budget?
Total government revenue from all sources is equal to total government spending
Which budget covers day-to-day expenses?
Operating budget
Which budget is not subject to balanced budget requirements?
Capital budget
Which expenses do capital budgets fund?
Major construction and maintenance projects, land acquisition
Which states are required to have a balanced budget?
All states, except Vermont
Which states have no individual or corporate income taxes?
Nevada and Wyoming
Which types of taxes do states levy on businesses and professionals?
Property taxes, fees related to businesses, and license fees for professionals
Which of the following is NOT a requirement to be included in the GDP?
The good or service must be produced by a foreign country.
Which of the following sectors is NOT included in the calculation of GDP?
Imports
Which letter is used to represent net exports in the GDP equation?
X
Which one of these is the most accurate description of nominal GDP?
Nominal GDP is GDP in terms of the current value of goods and services.
Which one of these is the most accurate description of real GDP?
Real GDP is the GDP if prices were to remain constant from year to year.
What is the purpose of comparing nominal GDP to a base year when calculating real GDP?
To factor out rising prices
Which phase of the business cycle is characterized by a prolonged economic contraction lasting two or more quarters (six months or more)?
Recession
What is the term used to describe an extended period of high unemployment and reduced business activity?
Depression
What is the term used to describe periods during which prices rise at the same time there is a slowdown in business activity; a stagnation of business activity and inflation of prices?
Stagflation
What is the final phase of the business cycle, characterized by the point at which real GDP and employment stop declining?
Trough
Which type of unemployment occurs when workers' skills do not match the jobs that are available?
Structural Unemployment
Based on the text, which type of unemployment occurs when industries slow or shut down for a season or make seasonal shifts in their production schedules?
Seasonal Unemployment
What is the normal unemployment rate in an economy that is working properly?
4 to 6 percent
What is the definition of full employment according to the text?
The level of employment reached when there is no cyclical unemployment
What is the definition of the unemployment rate according to the text?
The percentage of the labor force that is unemployed
What causes inflation according to the quantity theory?
Too much money in the economy
Which of the following is a major cause of poverty?
Lack of education
What is the poverty threshold for a household of 4 in 2019?
$25,750
Which theory attributes inflation to too much money in the economy?
The quantity theory
Which government program provides block grants to states for implementing their own assistance programs?
Temporary Assistance for Needy Families (TANF)
According to Keynesian economics, what can the government do during a recession to stimulate the economy?
Increase government spending to make up for the decrease in consumer spending
What is the multiplier effect in fiscal policy?
Every dollar in fiscal policy creates a greater than one dollar change in economic activity
What is an automatic stabilizer in fiscal policy?
A government tax or spending category that changes in response to changes in GDP or income
What is the national debt?
The total amount of money the federal government owes
According to the text, what is the crowding-out effect?
The decrease in business investment due to an increase in government spending
Which of the following accurately describes fiscal policy?
Fiscal policy is the federal government's use of taxing and spending to keep the economy stable.
Which of the following is an example of an expansionary fiscal policy?
The federal government increases spending on infrastructure projects.
Which of the following is an example of a contractionary fiscal policy?
The federal government decreases spending on defense.
What is the purpose of a federal budget?
To outline the government's expected revenue and expenditure for a specific fiscal year.
Which of the following accurately describes the budget process?
Federal agencies send requests for money to the Office of Management and Budget, and Congress makes changes to the budget.
Which of the following is a more comprehensive measure of trade because it includes not just goods and services but also money spent, travel, and investments?
Balance of Payments
What determines how much you will spend on a coat in Canada if the price is $300 CAD and the exchange rate is 0.7437 USD/CAD?
$223.11
Which publication publishes daily exchange rates?
Wall Street Journal
What is the term used to describe a situation where a country's exports are higher than its imports?
Trade surplus
What is the potential consequence of contracting the money supply too much?
Recession
What is the term used to describe the total amount of money owed by a country's government?
National debt
What action does the Federal Reserve commonly take to enact a tight-money policy?
Increase reserve requirements
What is GATT?
General Agreement on Tariffs and Trade
What is the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports?
Protectionism
Which budget covers day-to-day expenses?
Operating budget
Test your knowledge of economic terms with this quiz! Learn about the different phases of the business cycle, the components of gross domestic product, and the various types of unemployment. Explore inflation and its impact on prices. Challenge yourself and become an expert in economic concepts!
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