Economics Chapter: Inflation and Unemployment
48 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What does the Phillips Curve suggest about the relationship between unemployment and inflation?

  • Higher inflation leads to lower unemployment.
  • Lower unemployment leads to higher inflation. (correct)
  • Inflation has no relationship with unemployment.
  • Higher unemployment leads to higher inflation.

    • Stagflation is characterized by high inflation and high unemployment.

    True

    Which of the following is true about variable interest rates?

  • They guarantee a fixed payment over time.
  • They are used exclusively for auto loans.
  • They can increase unpredictably. (correct)
  • They are always lower than fixed rates.

    • Predatory lending practices only affect wealthy borrowers.

    <p>False</p> Signup and view all the answers

    What are the four phases of the business cycle?

    <p>Expansion, Peak, Contraction, Trough</p> Signup and view all the answers

    What is one way to identify predatory loans?

    <p>High interest rates or strict repayment terms.</p> Signup and view all the answers

    During a recession, the economy officially shrinks for two or more consecutive ______.

    <p>quarters</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Expansion = Economic output grows and employment rises Peak = The highest point of economic growth Contraction = Output declines, and unemployment rises Trough = The lowest point before growth starts again</p> Signup and view all the answers

    A payday loan with an interest rate equivalent to _____ annually can trap borrowers in debt.

    <p>400%</p> Signup and view all the answers

    How do governments typically respond to high inflation?

    <p>Increase interest rates</p> Signup and view all the answers

    Match the types of loans with their characteristics:

    <p>Variable Interest Rates = Payments can vary over time Fixed Interest Rates = Payments remain the same throughout the loan Payday Loan = Short-term high-interest loan Personal Loan = Typically lower interest than credit cards</p> Signup and view all the answers

    What should you do to determine if an interest rate is good?

    <p>Compare it with other offers.</p> Signup and view all the answers

    High unemployment has no impact on economic growth.

    <p>False</p> Signup and view all the answers

    What event often triggers recessions?

    <p>Economic shock</p> Signup and view all the answers

    How much interest will you pay on a $1,200 loan at a simple interest rate of 6% over 3 years?

    <p>$216</p> Signup and view all the answers

    Interest rate caps exist to protect consumers from excessive fees.

    <p>True</p> Signup and view all the answers

    What does GNP include that GDP does not?

    <p>Goods and services made by a country's residents abroad</p> Signup and view all the answers

    The Human Development Index (HDI) considers only economic output.

    <p>False</p> Signup and view all the answers

    What is inflation?

    <p>The rise in prices of goods and services over time, leading to a decrease in purchasing power.</p> Signup and view all the answers

    The _____ measures the percentage of people in the labor force who are actively looking for work.

    <p>unemployment rate</p> Signup and view all the answers

    Match the types of unemployment with their descriptions:

    <p>Frictional unemployment = Temporary unemployment while transitioning between jobs Structural unemployment = Job loss due to technological changes or skills mismatch Cyclical unemployment = Job loss due to economic downturns Seasonal unemployment = Job loss due to seasonal fluctuations in demand</p> Signup and view all the answers

    What is the effect of demand-pull inflation?

    <p>Prices rise due to high demand exceeding supply</p> Signup and view all the answers

    When unemployment is high, inflation tends to rise.

    <p>False</p> Signup and view all the answers

    Describe the Phillips Curve.

    <p>The Phillips Curve illustrates the inverse relationship between inflation and unemployment.</p> Signup and view all the answers

    What is the primary purpose of antitrust laws like the Sherman Act?

    <p>To prevent one company from controlling the market</p> Signup and view all the answers

    The government takes no action to regulate fair economic practices.

    <p>False</p> Signup and view all the answers

    Name one way the government redistributes income to reduce inequality.

    <p>Transfer payments (like welfare or unemployment benefits)</p> Signup and view all the answers

    Governments provide __________ goods because private companies wouldn’t make a profit from them.

    <p>public</p> Signup and view all the answers

    How do governments promote economic stability?

    <p>By reducing spending and raising interest rates during inflation</p> Signup and view all the answers

    Match the economic roles of government with their descriptions:

    <p>Providing legal structure = Creating laws to protect property and enforce contracts Maintaining competition = Preventing monopolies and ensuring fair prices Redistributing income = Offering welfare benefits and tax adjustments Reallocating resources = Addressing market failures such as pollution</p> Signup and view all the answers

    Public goods can easily exclude non-payers from benefiting from them.

    <p>False</p> Signup and view all the answers

    What is one challenge of government intervention in the economy?

    <p>Politics or special interest influence</p> Signup and view all the answers

    Which of the following best describes fiscal policy?

    <p>The government uses taxes and spending to affect the economy.</p> Signup and view all the answers

    Who is in charge of implementing fiscal policy in the United States?

    <p>Congress and the President</p> Signup and view all the answers

    The Federal Reserve is responsible for fiscal policy in the United States.

    <p>False</p> Signup and view all the answers

    What action would the government most likely take in response to high unemployment as part of fiscal policy?

    <p>Cut taxes and increase government spending</p> Signup and view all the answers

    The ______ controls the supply of money and interest rates to influence the economy.

    <p>central bank</p> Signup and view all the answers

    Match the types of taxes with their descriptions:

    <p>Income Tax = A percentage of the money you earn from your job. Sales Tax = A small amount added to the price of things you buy.</p> Signup and view all the answers

    If inflation is high, what action might the central bank take as part of monetary policy?

    <p>Raise interest rates to reduce borrowing.</p> Signup and view all the answers

    Fiscal and monetary policies are similar to the tools a mechanic uses to tune up a ______.

    <p>car</p> Signup and view all the answers

    What is the primary purpose of subsidies?

    <p>To assist local businesses in competing with foreign products</p> Signup and view all the answers

    Tariffs increase the prices of foreign goods in order to protect local industries.

    <p>True</p> Signup and view all the answers

    Name two outcomes of free trade agreements (FTAs).

    <p>Removal of tariffs and quotas</p> Signup and view all the answers

    A _____ is a limit on the amount of a product that can be imported.

    <p>quota</p> Signup and view all the answers

    Match the trade policy with its effect:

    <p>Tariffs = Make foreign goods more expensive Quotas = Limit the quantity of imported products Subsidies = Lower domestic production costs Free Trade Agreements = Eliminate tariffs and quotas</p> Signup and view all the answers

    What is a potential consequence of implementing quotas?

    <p>Encouragement of local production</p> Signup and view all the answers

    Trade policies only benefit consumers by providing lower prices.

    <p>False</p> Signup and view all the answers

    How can changes in exchange rates affect pricing in stores?

    <p>Prices of imported goods may go up or down.</p> Signup and view all the answers

    Study Notes

    Economics Study Guide

    • This study guide provides information for students to document their answers on a separate sheet of paper, either a word document, or print, and submit them back to the teacher.
    • Students are encouraged to contact their instructor with any questions as they work through the study guide, or when ready for a review.

    Section 1: Introduction to Economics

    • Economics is about making choices, weighing options and considering what is best.
    • It includes decisions about spending or donating to charity, involving choices about how to allocate limited resources (like time or money).
    • Economists study why we don't always make choices that are the most efficient.
    • Economics considers both the overall economy and individual choices, combining science, social science, and art.
    • It is important to consider how decisions and choices impact our lives on a daily basis.

    Section 2: Supply, Demand, and Market Structures

    • Science can shape how we live and affect markets.
    • The COVID-19 pandemic in 2020 disrupted markets and economies.
    • The law of demand states that when prices increase, people buy less.
    • The law of supply states that prices rise and sellers supply more and vice versa.
    • The market's equilibrium price is where supply matches demand.
    • During the pandemic, shifts in supply and demand caused price and availability disruptions.

    Section 3: Personal Finance and Money Management

    • Budgeting is creating a plan for how to spend money, tracking income and expenses.
    • Income is the total amount of money earned.
    • Fixed expenses are regular expenses that do not change.
    • Variable expenses can change monthly.
    • Savings are essential for future needs and emergencies.
    • Debt repayment is crucial to reduce interest over time.

    Section 4: Economic Indicators and the Business Cycle

    • GDP measures the total value of goods and services produced within a country.
    • The GDP is calculated by adding spending of three groups.
    • Consumption is spending by households.
    • Investment is business investments and home purchases.
    • Government Spending is government expenses.
    • Net Exports is exports minus imports (GDP = C + I + G + NX).
    • Economic analysis tools are used to determine economic health and growth.
    • GDP growth indicates expansion (boom) and negative growth indicates recession (bust).
    • GDP per capita compares living standards among different countries.

    Section 5: Government and the Economy

    • Governments play a vital role by establishing a legal framework, promoting competition, and managing income distribution.
    • Governments also control pollution, provide public goods and services.
    • Taxes are essential for funding public resources and programs.
    • Government use taxes to fund necessary services.
    • Fiscal Policy affects government spending and taxes.
    • Monetary policy affects the money supply.

    Section 6: International Trade and Global Economics

    • International trade involves countries buying and selling goods and services.
    • Countries trade to benefit from specialization and comparative advantage.
    • Comparative advantage refers to producing a good or service at a lower opportunity cost.
    • Absolute advantage means being able to produce a good or service more efficiently.
    • Exchange rates reflect values of one country's currency relative to another.
    • Governments use trade policies (e.g., tariffs, quotas, subsidies) to manage trade.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Economics Study Guide PDF

    Description

    Explore the critical concepts surrounding the Phillips Curve and its implications on the relationship between unemployment and inflation. This quiz also covers aspects of the business cycle, predatory lending practices, and government responses to economic challenges. Test your knowledge on these essential economic principles.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser