Econ 102 Exam Questions with 100%
Correct Answers
The point where economic activity bottoms out in a full business cycle is
known as: - The point where economic activity bottoms out in a full
business cycle is known as the trough. The low point in a business cycle
which precipitates a period o...
Econ 102 Exam Questions with 100% Correct Answers The point where economic activity bottoms out in a full business cycle is known as: - ✔✔The point where economic activity bottoms out in a full business cycle is known as the trough. The low point in a business cycle which precipitates a period of economic growth is known as the trough. A recession is the entire period of time where real GDP is falling. The phrase pre -expansion is not commonly used. One of the primary goals of most governments with rega rd to the economy is: - ✔✔One of the primary goals of most governments with regard to the economy is full employment. Full employment is a typical goal of most governments since this means that a percentage of those individuals that would like to be emplo yed are employed. These employment opportunities provide individuals with the means to increase their standard of living and reduce the amount of government transfer payments needed to provide support for the unemployed. Increased taxation, increased milit ary spending, and higher consumer spending may all be occurring in an economy they are rarely listed as an economic goal but are instead mechanisms used to achieve some goal. What is nominal interest rate? - ✔✔real interest rate plus the rate of inflation What is the real interest rate? - ✔✔nominal interest rate - inflation rate The balance of trade is: - ✔✔The balance of trade is equal to the difference between exports of goods and imports of goods. Countries rarely balance with the value of exports exactl y equal to the value of imports. Trade surpluses and trade deficits are the norm for all open economies. Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products. - ✔✔Many economists believe the CPI overstates inflation because it fails to consider quality improvements in products. For example, while many electronic products have fallen in price, they have also improved significantly with added functions and more features. The CPI does not capture th is change in quality because it is difficult to assign a value to quality differences. Economic variables that are calculated in current year prices are referred to as __________ variables, while variables that have been corrected to account for the effect s of inflation are __________ variables. - ✔✔Economic variables that are calculated in current year prices are referred to as nominal variables, while variables that have been corrected to account for the effects of inflation are real variables. Nominal va riables simply look at the observed value, but in order to adjust for change that is simply due to a change in price, you need to adjust for inflation. Real values have been adjusted for inflation. Positive net exports occur when: - ✔✔Positive net exports occur when exports are greater than imports. Countries rarely balance with the value of exports exactly equal to the value of imports. For example, while Canada has had a long history of running trade surpluses (until fairly recently when we began to recor d small trade deficits), the United States consistently imports a higher value of goods than it exports and therefore runs a trade deficit. Unemployment rates in developed countries around the world: - ✔✔Unemployment rates in developed countries around the world show substantial variation. Unemployment rates vary quite a bit from country to country. For example, in early 2013 the unemployment rates in many southern European countries such as Spain and Greece exceeded 20 percent while the unemployment rate i n Canada was below 7.5% percent. The stated rate of interest on a loan is the: - ✔✔The stated rate of interest on a loan is the nominal interest rate. The nominal, or stated or quoted rate, incorporates the real rate of interest plus an expected inflation premium. If inflation differs from expected, savers can be harmed and borrowers will benefit. The nominal rate of interest = real rate of interest + rate of inflation. Which type of fiscal policy would cause the move of the AD curve right? - ✔✔Higher government spending would cause the move of the AD curve represented in this graph. Higher government spending would increase aggregate demand which is represented by a righ tward shift in the AD curve. Higher taxes and lower money supply would cause the AD curve to shift to the left. In addition, decreasing the money supply is monetary policy and not fiscal policy. During the 1960s, many economists believed the government co uld do a good job regulating the level of inflation and unemployment. These policies
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