ECON 214 Test 5 Liberty
University complete Actual set with
Questions and correct/verified Answers
Expansionary monetary policy - ANSWER-money supply increases and interest rates decrease, AD
increases, real GDP increases
(open market purchase of treasury Securities)
Open market purchases by the Fed loanable funds market _______ and interest rates ______ - ANSWER-
Increase, decrease
Fisher equation - ANSWER-nominal interest rate - inflation rate = real interest rate*
Contractionary monetary policy - ANSWER-money supply decreases and interest rates increase, AD
decreases, price level decreases
(open market sale of Treasury securities)
Monetary neutrality - ANSWER-money supply does not affect real economic variables
The Phillips curve - ANSWER-inverse relationship between inflation and unemployment rates, not a
stable curve but may shift in the long run.
How workers are affected by unexpected inflation - ANSWER-only unexpected inflation can lower
unemployment
World exports/world GDP - ANSWER-Total world exports are 1/4th of world GDP
The impact of free trade on price and quantity - ANSWER-Trading with comparative advantage reduces
prices and increases production
Trade deficit - ANSWER-When imports exceed exports for a country. U.S. has been in trade deficit since
1975
Comparative advantage - ANSWER-Specialize in producing the product that has lower opportunity cost
and trading for the other goods and services that a country wishes to consume
Comparative advantage calculation - ANSWER-What you're giving up/what you're producing
Tariff: - ANSWER-taxes levied on imported goods and services, paid by the producer of the imported
good when the good arrives in a foreign country.
Quotas: - ANSWER-limits on the quantity of products that can be imported into a country.
Why trade barriers? - ANSWER-National Security, infant industries, Anti-dumping, Special Interests.
Depreciation and appreciation of a currency - ANSWER-$1.30 = € 1 -> $1.24 = € 1
Higher interest rates in the U.S. - ANSWER-increased demand for U.S. dollars, Increase the value of dollar
University complete Actual set with
Questions and correct/verified Answers
Expansionary monetary policy - ANSWER-money supply increases and interest rates decrease, AD
increases, real GDP increases
(open market purchase of treasury Securities)
Open market purchases by the Fed loanable funds market _______ and interest rates ______ - ANSWER-
Increase, decrease
Fisher equation - ANSWER-nominal interest rate - inflation rate = real interest rate*
Contractionary monetary policy - ANSWER-money supply decreases and interest rates increase, AD
decreases, price level decreases
(open market sale of Treasury securities)
Monetary neutrality - ANSWER-money supply does not affect real economic variables
The Phillips curve - ANSWER-inverse relationship between inflation and unemployment rates, not a
stable curve but may shift in the long run.
How workers are affected by unexpected inflation - ANSWER-only unexpected inflation can lower
unemployment
World exports/world GDP - ANSWER-Total world exports are 1/4th of world GDP
The impact of free trade on price and quantity - ANSWER-Trading with comparative advantage reduces
prices and increases production
Trade deficit - ANSWER-When imports exceed exports for a country. U.S. has been in trade deficit since
1975
Comparative advantage - ANSWER-Specialize in producing the product that has lower opportunity cost
and trading for the other goods and services that a country wishes to consume
Comparative advantage calculation - ANSWER-What you're giving up/what you're producing
Tariff: - ANSWER-taxes levied on imported goods and services, paid by the producer of the imported
good when the good arrives in a foreign country.
Quotas: - ANSWER-limits on the quantity of products that can be imported into a country.
Why trade barriers? - ANSWER-National Security, infant industries, Anti-dumping, Special Interests.
Depreciation and appreciation of a currency - ANSWER-$1.30 = € 1 -> $1.24 = € 1
Higher interest rates in the U.S. - ANSWER-increased demand for U.S. dollars, Increase the value of dollar
