Economic Theories and Federal Reserve Functions

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Questions and Answers

What is the primary focus of Keynesian economic theory?

Regulating the money supply

Tax incentives for businesses

Self-adjusting market dynamics

Creating demand through government spending (correct)

Which function is NOT associated with the Federal Reserve?

Supervising and regulating banks

Managing currency

Maintaining financial stability

Controlling fiscal policy (correct)

What type of economic policy does protectionism refer to?

Promoting free trade agreements

Shielding domestic industries through import taxes (correct)

Encouraging exports through subsidies

Reducing tariffs on foreign goods

What was the primary consequence of the Smoot-Hawley Act?

Increased import duties on several products Signup and view all the answers

Which country is identified as the United States' largest trading partner?

Mexico Signup and view all the answers

What does 'comparative advantage' imply?

Certain countries can produce goods more efficiently Signup and view all the answers

What does the term 'race-to-the-bottom' signify in international trade?

Decreasing wages to attract businesses Signup and view all the answers

Which of the following statements is true regarding the United States' trade policy?

It employs a three-pronged strategy including regional integration Signup and view all the answers

Which economic theory primarily emphasizes the self-adjusting nature of the economy?

Classical economic theory Signup and view all the answers

What is one of the key roles of the Federal Reserve in the financial system?

Controlling monetary policy Signup and view all the answers

Which of the following best describes protectionism?

Shielding domestic industries by taxing imports Signup and view all the answers

The Smoot-Hawley Act primarily led to what action?

Increasing import duties Signup and view all the answers

Which option correctly identifies one benefit of greater international trade for the United States?

Increased national income Signup and view all the answers

What characterizes the race-to-the-bottom phenomenon?

Rich countries outsourcing jobs to poorer countries Signup and view all the answers

What does NAFTA stand for, and what was its main purpose?

North American Free Trade Agreement; eliminating trade barriers Signup and view all the answers

Which person is recognized as the father of modern economics?

Adam Smith Signup and view all the answers

Study Notes

Economic Theories

Classical Economics: Self-adjusting economy, market forces resolve issues.
Keynesian Economics: Government intervention to stimulate demand through spending.
Supply-Side Economics: Tax cuts and incentives to stimulate supply, reduced government spending.
Monetary Economics: Regulating the money supply to influence the economy.

Federal Reserve Functions

Controlling monetary policy (interest rates, money supply).
Supervising and regulating banks.
Maintaining financial stability.
Managing currency.

Key Economic Figures

Adam Smith: Considered the father of modern economics.
Jerome Powell: Current Chairman of the Federal Reserve.

Trade Policy

Protectionism: Shielding domestic industries by taxing imports.
Protectionist Policies in the US: Followed in the 19th century.
Smoot-Hawley Act: Increased import duties, including agricultural imports.
Largest US Trading Partner: Mexico.
Comparative Advantage: Devoting resources to produce goods and services more efficiently (beneficial for exporters and consumers).
Disadvantage of International Trade: Job losses in some sectors. Workers are disadvantaged.
US Trade Strategy: Three-pronged approach—global tariff reductions, regional integration, and bilateral agreements.
Benefits of International Trade: Trade imbalances reflected in investment, increased national income.
Disadvantages of International Trade: Job losses, risk of "race to the bottom" (lowering labor standards). Race to the bottom means going from rich countries working to poor countries.
WTO: World Trade Organization, overseeing trade rules between nations.
NAFTA: North American Free Trade Agreement, eliminated trade barriers between the US, Canada, and Mexico.
TPP: The United States is not a part of the Trans-Pacific Partnership.

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Description

Test your understanding of various economic theories, including Classical, Keynesian, Supply-Side, and Monetary Economics. Dive into the essential functions of the Federal Reserve and learn about key economic figures that shaped modern economics. Explore trade policies and their historical impact.