MACRO

Question 1

What does GDP stand for?

Answer 1

Gross Domestic Product

Measures the total value of goods and services produced.

Question 2

What is the difference between Real GDP and Nominal GDP?

Answer 2

Real GDP is adjusted for inflation; Nominal GDP is not.

Question 3

What does the Consumer Price Index (CPI) measure?

Answer 3

Average change in prices paid by consumers.

Question 4

What is an expansionary fiscal policy?

Answer 4

Increase government spending or cut taxes during a recession.

Question 5

What is a contractionary fiscal policy?

Answer 5

Decrease government spending or raise taxes during inflation.

Question 6

What role does the Federal Reserve (Fed) play in monetary policy?

Answer 6

Controls the money supply and interest rates.

Question 7

What is the goal of expansionary monetary policy?

Answer 7

Increase money supply and lower interest rates to boost the economy.

Question 8

What is the goal of contractionary monetary policy?

Answer 8

Decrease money supply and raise interest rates to slow inflation.

Question 9

What are open market operations?

Answer 9

Buying and selling government bonds to control money supply.

Question 10

What is a fixed exchange rate?

Answer 10

Currency value is tied to another currency.

Question 11

What is a floating exchange rate?

Answer 11

Currency value is determined by market forces (supply and demand).

Question 12

Fill in the blank: The formula for GDP is _______.

Answer 12

C + I + G + (X - M)

Question 13

What does ‘C’ represent in the GDP formula?

Answer 13

Consumer spending

Question 14

What does ‘I’ represent in the GDP formula?

Answer 14

Investment

Question 15

What does ‘G’ represent in the GDP formula?

Answer 15

Government spending

Question 16

What does ‘X - M’ represent in the GDP formula?

Answer 16

Exports minus imports

Question 17

What is the Money Supply Formula in monetarism?

Answer 17

MV = PY

M = money supply, V = velocity of money, P = price level, Y = real GDP

Question 18

What happens when the dollar devalues?

Answer 18

Foreign goods cost more, prices go up in the US, US goods are cheaper for other countries.

Question 19

What exchange rate system was in place from 1870 to 1914?

Answer 19

Gold Standard

Question 20

What exchange rate system was established in 1946?

Answer 20

Bretton Woods (US dollar fixed to gold)

Question 21

What happened during the 2008 recession?

Answer 21

Easy mortgages and risky loans led to a housing boom and crash.

Question 22

What is the government’s response to a recession?

Answer 22

Spend more or lower taxes, creating a budget deficit.

Question 23

What is the government’s response to inflation?

Answer 23

Spend less or raise taxes, creating a budget surplus.

Question 24

How does the government pay for deficits?

Answer 24

Taxes, borrowing (selling bonds), printing money (not allowed).

Question 25

What is jawboning?

Answer 25

Pressuring companies to slow down price and wage increases.

Question 26

What are Wage-Price Guideposts?

Answer 26

Set rules for how much wages and prices can rise.

Question 27

What is a Wage-Price Freeze?

Answer 27

No wage or price increases allowed.

Question 28

What is Supply-Side Economics?

Answer 28

Lower taxes to boost savings, investments, and work.

Question 29

What do Keynesians believe regarding government spending?

Answer 29

It boosts the economy (Crowding-In).

Question 30

What do Monetarists believe regarding government spending?

Answer 30

It raises interest rates and pushes out private investment (Crowding-Out).

Question 31

What is the cost of expansionary monetary policy?

Answer 31

Inflation

Question 32

What is the cost of contractionary monetary policy?

Answer 32

Can cause a recession