ECO 202 Dellachiesa UKy Final Exam

What is an ad valorem tax?

A percentage of the price of the good

tariffs have both protective and _____________ effects

revenue

what do import tariffs change with respect to:
domestic consumption
(increase/decrease)?
domestic production
(increase/decrease)?
domestic prices
(increase/decrease)?

import tariffs decrease domestic consumption
increase domestic production
increase domestic prices

do import tariffs change government revenue?

nope

In a recessionary gap, the Federal Government will (buy/sell) bonds

Buy
(buying bonds will increase money supply)

In a recessionary gap, the Federal Government will (increase/decrease) R?

decrease
(lower interest rates entices people to buy now)

In a recessionary gap, the Federal Government will (increase/decrease) DLR

decrease
(a low discount lending rate will inject more money into the market because banks can now use more money)

In a recessionary gap once the interest rate is lowered, what happens to the exchange rate?

a low interest rate will decrease the exchange rate

a lower exchange rate causes exports to (rise/fall)

rise

higher exports (increases/decreases) GDP

increases

a lower interest rate does what to consumption and investment?

both rise

Inflation (rises/falls) as a result of an increased money supply?

rises

a high inflation does what to consumer purchase capacity?

decreases

In an expansionary gap, the Fed will (buy/sell) bonds

sell
lowers money supply

In an expansionary gap, the Fed will (increase/decrease) interest rates

increase because a higher interest rates makes consumers less likely to buy stuff

In an expansionary gap, the Fed will (increase/decrease) DLR

increase
a higher DLR leaves less money for banks to inject into market

a lower money supply (increases/decreases) interest rates

increases

a lower money supply will do (increase/decrease) exchange rates

increase

higher interest rates do what to C and I

decrease

higher exchange rates do what to exports

make them go down

a low Money Supply will do what to inflation?

decrease

what is structural unemployment?

mismatch of jobs and skills during a specific time in the market
included in natural rate of unemployment

what is cyclical unemployment?

it goes up and down
not included in full employment

What is frictional unemployment?

when people move from one job to another (search process)
included in natural rate of unemployment

what is the labor force participation rate

(employed+unemployed)/ working age population
multiplied by 100

expansions cause the unemployment rate to (rise/fall)
and the inflation rate to (rise/fall)

fall
rise

an increase in government expenditure is an example of what kind of fiscal policy

expansionary

increasing government expenditure will shift the aggregate demand curve to the __________

right

how do you find the exchange rate of a currency given supply and demand?

set equations equal to each other

do changes in CPI understate or overstate the true value of inflation?

overstate

the quantity theory of money seeks to explain the connection between price levels and what?

money

if the fed increases the reserve requirement their loans go (up/down)

down

a (decrease/increase) in taxes will increase consumption spending, and a (decrease/increase) in transfer payments will increase consumption spending

decrease
increase

a bank is legally required to hold a fraction of its deposits as

required reserves

if the fed buys bonds then reserves will (increase/decrease)

increase

how do you find MPC?

1-(change in consumption/change in income)

a decrease in oil prices in the short run will lead to a (increase/decrease) in the employment rate and a (increase/decrease) in the price level

increase in employment
decrease in price

Taxes-Transfers=

Government savings

how do you find the output gap?

Actual GDP (production) - Potential GDP (production)

How do you find unemployment?

natural rate of unemployment (5%-gap%)/2

how do you find cyclical unemployment?

%gap/2

how do you find the exchange rate between two countries?

currency of country y/currency of country x

if you have a low exchange rate will you import or export more?

low exchange rate= export more

cyclical unemployment is

when there is a slowdown in the economy
cyclical=sounds like sl=slowdown

frictional unemployment is

unemployment that occurs when people take time to find a job
frictional=frick=frick i should probably find a job

structural unemployment

unemployment that occurs when workers' skills do not match the jobs that are available
structural=strut=skill

What is the GDP deflator?

nominal GDP/Real GDP
*100