1. Is opportunity cost always present? 2. What is the problem at the heart of ec
ID: 1188473 • Letter: 1
Question
1. Is opportunity cost always present?
2. What is the problem at the heart of economics?
3. What is included in GDP and what is excluded?
4. If the consumer price index increases, how does this impact the average citizen?
5. What is the business cycle?
6. What is the relationship among the potential output level of the economy, the natural rate of unemployment, cyclical unemployment, structural unemployment, and frictional unemployment?
7. What did Keynesians believe about investment and the adjustment of wage rates?
8. What did pre-Keynesian believe about the market and its ability to pull itself out of a recession?
9. What role do investments in human capital, physical capital, technology development, and improving institutional quality play in creating economic growth?
10. How does a fractional reserve banking system work and what is the relationship between the money multiplier and the reserve requirement?
Wh What is fiscal policy?
12. What are the relations between government spending, the marginal propensity to consume, the marginal propensity to save, and the multiplier effect?
13. What are some of the problems with using fiscal policy in an effective manner?
14. What role did the Great Depression play in changing the government%u2019s approach to the economy?
15. What is stagflation and how did it challenge Keynesian orthodoxy?
16. What is supply side economics and how does it function?
17. What is the crowding out effect?
18. What is the new classical approach to the stimulatory impact of fiscal policy implemented through deficit spending?
19. What role does the department of the Treasury play in the American economy?
20. What role does the Federal Reserve Banking system play in managing the American policy?
21. What are the tools that the Fed uses to influence the money supply?
22. What approach to the money supply do those embracing monetarism suggest?
23. What dangers does monetary policy pose for the economy?
24. How do shifting price levels impact debtors and savers?
25. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax cut?
26. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax increase?
27. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an increase in government spending?
28. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of a cut in government spending?
29. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an expansionary monetary policy?
30. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a restrictive monetary policy?
31. How do automatic stabilizers influence the economy?
32. How does a deficit and large debt influence the economy?
33. What is the relationship between the expansion of the money supply and inflation?
34. What is the relationship between interest rates and inflation rates?
35. How do expectations impact the effectiveness of monetary policy?
36. What restricts the ability of the Fed to purchase U.S. securities?
37. What is Money?
38. What is the primary motivation of bankers and banks?
39. What is the impact of higher interest rates on the value of a currency and a nation%u2019s net exports?
40. What is the Conference Board and what does it do?
41. Why do countries willing lend the U.S. government money despite the relatively large debt to GDP ratio of the United States?
42. How does trade contribute to growth?
43. How do institutions contribute to growth?
44. How does the relative size of government contribute to growth?
45. What is the Philips Curve?
46. How does the rule of 70 work?
47. Do High Income countries always grow at a faster pace than lesser developed countries?
48. How do high levels of inflation effect growth?
49. Can you identify the amount of growth in an economy by using the percentage change formula?
50. What countries are presently experiencing high rates of economic growth?
12.
Explanation / Answer
Ans-1)The opportunity cost in a situation is always present when a choice must be made between two things.
Ans-2)the basic economic problem is the unlimited wants and needs of human which results to scarcity of resources.
Ans-3)GDP is the value of all the goods and services produced in the country in one year. Money earned outside of the country is not included.
Ans-4)Inflation also reflects an erosion in the purchasing power of money %u2013 a loss of real value in the internal medium of exchange and unit of account in the economy
Ans-5)The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. A business cycle is identified as a sequence of four phases:
Ans-6)The natural unemployment rate is all unemployment other than cyclical. That means you add frictional, seasonal, and structural unemployment together. Any unemployment beyond this is cyclical. In your question we add 2+2+.5 and we get a natural rate of 4.5%.
Ans-7) Saving and investment, the Keynesians charge, are two entirely separate processes, performed by two sets of people with little or no link between them; the "classical" identification of saving and investment is therefore illegitimate. Savings "leak" out of the consumption-spending stream; investments pour in from some other phase of spending.
Sophisticated Keynesians now admit that the Keynesian theory of "underemployment equilibrium" does not really apply (as was first believed) to the free and unhampered market: that it assumes, in fact, that wage rates are rigid downward. "Classical" economists have always maintained that unemployment is caused precisely by wage rates not being allowed to fall freely; but in the Keynesian system this assumption has been buried in a mass of irrelevant equations.
Ans-9) economic growth is concerned with the long-run trend in production due to structural causes such as technological growth and factor accumulation. The business cycle moves up and down, creating fluctuations around the long-run trend in economic growth.The most commonly used measure of human capital is the level of school attainment in a country, building upon the data development of Robert Barro and Jong-Wha Lee.[45] This measure of human capital, however, requires the strong assumption that what is learned in a year of schooling is the same across all countries.
Ans-10)financial institution which borrows money (we call it "deposit") from one person and then lends that money to another (with higher interest of course). But how can bank get deposit, lend that money to someone else and still promise to depositor that he can always get his money back? It looks like it's a logical problem - how can bank give away money to depositor, if the bank doesn't have that money
Ans-11) Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation%u2019s economy.
Ans-14)The major effect of the Great Depression on America was expanded government intervention into new areas of social and economic affairs and the creation of more social assistance agencies at the national level. The relationship between the national government and the people changed drastically. The government took on a greater role in the everyday social and economic lives of the people. The New Deal programs of FDR also created a liberal political alliance made up of labor unions, blacks and other ethnic and religious minorities, intellectuals, the poor, and some farmers. These groups became the backbone of the Democratic Party for decades following the Depression. The Great Depression and the New Deal measure led to the domestic programs of JFK%u2019s New Frontier, and LBJ%u2019s Great Society and War on Poverty. The New Deal measures have also an influence on the current Obama administration, in its attempts to stimulate the economy.
Ans-15)Stagflation-is a term used in economics to describe a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment, and vice versa.
Ans-16)Supply side economics is an economics theory built around the idea that by giving the rich enough money, tax breaks andderegulation, they will be freed from the constraints that allegedly prevent them from expanding their businesses and hiring more people.
Ans-17)Crowding out effect occurs when governments borrow funds from other countries to finance government spending usually through expansionary fiscal policies.
This is of concern because the government is overspending i.e. revenue that is collected from taxes and other relevant transactions is less than the amount put forward in the budget and more recently, large stimulus packages as what America has done in the past few months of 2009.
Ans-19)The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. The Department is responsible for a wide range of activities such as advising the President on economic and financial issues, encouraging sustainable economic growth, and fostering improved governance in financial institutions. The basic functions of the Department of the Treasury include:
Ans-20)The role of the U.S. Federal Reserve has come under increasing scrutiny in the wake of the 2007-2009 global financial crisis. Former Fed chairman Alan Greenspan's policy of holding interest rates down for an extended period of time in the early 2000s is thought by many economists to have fueled the housing bubble that contributed to the crisis. Greenspan rejects the notion that the Fed is responsible for what, he argues, was a global housing bubble(CNN). Either way, the Fed's large-scale interventions into the financial system during the height of the crisis have triggered a debate over the U.S. central bank's regulatory authority.
Ans-21)3 Tools to Change Money Supply:
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