Economics Units 6/7

The objective of fiscal policy is to

Reduce unemployment and control debt.

The Fed would use expansionary policy when

The economy is experiencing high unemployment.

What does the price stability goal in an economy mean?

That the general price level of goods and services in an economy does not change much over time.

A regressive tax:

Impacts everyone equally since they all pay the same amount.

A budget deficit occurs when the government:

Spends more tax revenues than it receives

The Fed does all of the following:

Regulate banks; Control the money supply; Act as a lender of last resort.

According to which macroeconomic theory is decreasing taxes and increasing government spending a sound policy to recover from a recession?

Keynesian

The Fed would use a contractionary policy when:

the economy grows too much and inflation is triggered

Which of the following is a function of the Federal Open Market Committee (FOMC)?

Buys securities from member banks; Raises or lowers fed funds rate; Sells securities to member banks

The U.S. income tax system is best described as

Progressive

A situation in an economy characterized by slow economic growth occurring at the same time as high rates of inflation is called:

Stagflation

When banks borrow from each other they do so at the:

Fed Funds Rate

Which of the following is a reason why a bank might hold on to excess reserves?

How close a bank is to insolvency (liabilities being greater than assets).

This refers to some measure of the value of economic transactions between two countries, or between a country and the rest of the world, perhaps scaled to total national output or to some measure of total financial assets.

Interdependence

Situation in which increases in government spending lead to reductions in private spending

Crowding out

Amount of money owed by the government:

National debt

A budget surplus occurs when the government

Receives more tax revenues than it spends.

The Federal Reserve Board is

Appointed

The 2009 Stimulus Bill which attempted to stabilize the U.S. economy is an example of

Keynesian economics

Fees, such as for license plates or entry into a state or national park are what considered what type of tax?

Regressive Taxes

The initials F.D.I.C. stand for:

Federal Deposit Insurance Corporation

Sales taxes and gas taxes are examples of.

Regressive taxes

The average number of times a dollar is spent to buy final goods and services in a year is called:

Velocity

The Laffer Curve attempts to explain.

The relationship that some economists believe exists between tax rates and tax revenues

Current Chair of the Federal Reserve.

Jerome Powell

\_______ is selling goods in foreign countries at prices below their costs & below the prices charged in the domestic market.

Dumping

A \________________ is a system where currency exchange rates are fixed by the country’s government.

fixed exchange rate

A country has a \________________ when it can produce a good at a lower opportunity cost than another country.

Comparative advantage

A country with relatively high GDP is considered to be a

developed country

The relationship between the value of a country’s exports and the values of its imports is called

balance of trade

A country with relatively low GDP is considered to be a

developing country

A decrease in the value of a currency is called

depreciation

A system where currency exchange rates are determined by the forces of supply and demand is called a

variable or floating exchange rate

A tax on an import is called a(n)

tariff

An increase in the value of a currency is called

appreciation

What is the agreement between the US, Mexico, and Canada called?

NAFTA or USMCA

When a company hires another company to do work, it is called

outsourcing

When a country allows items into their country, that item is called a(n)

import

When a country ships products to another country that product would be a(n)

export

A shared need of countries for resources, goods, services, labor, and knowledge supplied by other countries is called

trade

What is it called when a country can produce more of a good than another country can produce with the same quantity of resources?

absolute advantage

A ban on trade with a particular country is called a(n)

embargo

The lowering or elimination of protective tariffs and other trade barriers is called

free trade

When a company moves some of its operations to another country it is called

offshoring

The use of trade barriers to shield domestic industries from foreign competition is called

protectionism

A(n)\________ is the value of one’s currency in relation to a foreign currency.

exchange rate

A situation in which a nation imports more goods and services than it exports is called a(n)

trade deficit

A situation in which a nation exports more goods and services than it imports is called a(n)

trade surplus

A limited quantity of a particular product that under official controls can be produced, exported, or imported is called a

quota

The \_______________ deals with the global rules of trade between nations. Its main function is to ensure that trade flows smoothly, predictably and freely as possible.

World Trade Organization (WTO)