Macro Final Review

Question 1

What is a fiscal policy?

Question 2

What is an expansionary policy?

Question 3

What is a contractionary policy?

Question 4

Are fiscal policies cyclical or countercyclical?

Question 5

What type of fiscal policy should be implemented during a recession?

Answer 5

Expansionary policy - by increasing gov spending or decreasing taxation

Question 6

What type of fiscal policy should be implemented during inflation?

Answer 6

Contractionary policy - by decreasing gov spending or increasing taxation

Question 7

What does it mean to diversify someone’s assets?

Answer 7

Investing in assets across industries to prevent risk

Question 8

How do you reduce a risk? Which one can you reduce?

Answer 8

Market (non-reeducable) and non-market (reducible).

Question 9

What happens to supply and demand for loanable funds when the IR goes above or below the interest rate?

Question 10

What is the lifecycle hypothesis?

Answer 10

Individuals seek to soothe consumption throughout their lives. We borrow when we are low on income and save when we have high income.

Question 11

Trade deficit vs. Surplus