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economics may best defined as the

social science cocerned with how individuals, institutions, and society make optimal choices under condtions of scarcity

through specialization and international trade a nation

can attain some combination of goods lying outside its prodcution possibilties curve

the economic perspective entails

a comparison of margianl benefits and marginal costs in decision making

in deciding whether to study for an econmics test or go to a movie, one is confronted by the idea of

scarcity and opportunity cost

macroeconomics approaches the study of economics from the viewpoint of

the entire economy

GDP is

the monetary value of all final goods and services produced within a nation in a specific year

whic is a demand factor in economic growth

an increase in total spending in the economy

which is best considered a supply factor for long run economic growth

the stock of capital goods

what is one of the major measures of economic growth

increase in per capita real GDP

a recession occurs when

total output, incom, and, employment decline for at least 6 months

if a unintended increase in business inventories occurs at some level of GDP, then GDP

is too high for equilubrium

viewed through the aggregate expenditures model, the U.S. recession of 07-09 resulted mainly from

insufficient aggergate expenditures

in the US, the money supply M1 is comprised of

coins, paper currency, and checkable deposits

the money supply is backed

by govt. ability to control the supply of money and therefore to keep its value relatively stable

near monies

are certain highly liquid financial assets that do not function directly as a medium of echange but can be readily converted into M1

checkable deposits are classifed as money b/c

they can readily used in purchuasing goods and paying debts

an economist who favors expanded govy would recomend

increases in govt spending during recession and tax increases during inflation

suppose that the economy is in the midst of a recession. which of the following policies would most likely end the recession and stimulate output growth

a reduction in federal tax rate on personal and coporate income

which of the following tools of monetary policy is considered the most important

open market operations

holding the money deposits of businesses and households and making loans ot public are the basic function of

commercial banks and thrifts

what is one significant charcterstic of fractional reserve banking

baks can create money through lending their reserves

bank net worth is the

claims of the owners of the banks against bank assets

the financial services modernization act of 99

permitted banks, thrifts, pension companies, and sec. firms to merge and sell each others products

the federal funds market is the market in which

banks can burrow reserves from one another on an overnight basis

the 12 fed reserve banks

hold the reserve deposits of commercial banks

fiscal policy refers to the

manipulation of govt spending and taxes to stablize domestic output, employment, and the price leve

discretionary fiscal policy refers to

changes in taxes and govt expenditures made by congress to stablize economy

contercyclical discretionary fiscal policy calls for

deficits during recessions and surpluses durning periods of demand pull inflation

expansionary fiscal policy is so named because it

is designed to expand real GDP

the value of US imports is

subrtacted from exports when calculating GDP b/c imports do not constitute production in US

the group that sets the federal reserve systems policy on buying and selling govt securties (bills, notes, and bonds) is the

federal open market commitee (FOMC)

an imprtant routine funciton of the FED is to

provide facilities by which commericial banks and thrifts institutions may collect checks

whic of the following is the basic economic policy function of FED

controlling the supply of money

countres engage in international trade speclaize in production based on

comparative advantage

undrea system of freely flaoting exchange rates , an increase in teh interantional value of a nations currency will

cause imports to rise

the idea that freely exchange rates equate the purchasing pwr of national currencies is called

the purchasing pwr parity theory

the gain from international trade is

more goods tha would be attainable throug domestic production alone

an excise tax on an imported good that helps shield domestic producers of the good is called a

protective traiff

suppse the US sets limit ont the ton of sugar tha be imported each year. this is an example

import quota

suppose US eliminates high tariffs on german bikes. as a result, we would expect

employment to decrease in the US bike industry

one of the consequences of the US trade deficit is

the accumaltion of American dollars in forigen hands has enabled foreign firms to build factories in US

under the manged floating system of exchange rates

exchange rates are essentially flexible, but govt intervene to offset disorderly fluctuations in rates

in the real world, specialization is rarely complete b/c

nations experience increasing opportunity costs in producing more of he product in which they are specialized

the three stats that are the main focus for those measuring the health of the macro economy are

real GDP, inflation, and unemployment

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