ECON 2020 EXAM REVIEW
QUESTIONS WITH ACCURATE
SOLUTIONS 2026
▶ The business cycle. Answer: The business cycle shows periods of
expansion and
recession- Economic Activity.
The periodic, but irregular up and down movements in
economic activity, measured by fluctuations in real GDP and other
macroeconomic variables.
▶ Employment Act of 1946. Answer: Through the ability to intervene in the
economy, the federal government committed itself to promote
maximum employment at low rates of inflation.
▶ example of fiscal policy. Answer: You own a business that sells
automobile parts
wholesale. Your business employs 30 workers
and is considering spending $2,000,000 to buy
a new computer system that could keep track of
inventory. If you and your firm put in the
system, you believe you could eliminate 10
workers who each earn $22,000 annually, plus
fringe benefits. The machine's lifespan is 10
years. What do you do?
▶ mutual coincidence of wants. Answer: In a barter system both parties
have to have exactly what the other wants
this is why we have money
▶ what is the value of money?. Answer: -Money doesn't have any inherent
value. It has value
through our use.
, -Money has value because of supply and demand.
There is a limited supply for the demand of other
items.
-If one believes money will have value in the future,
one will work towards acquiring some.
-!!!The value of our currency is dependent upon our
confidence in the market.!!!
~money is no longer backed by gold standard~
▶ what can change the value of money?. Answer: The value of money can
change due to consumer
confidence, government policy, costs of production,
costs of living, and competing markets.
▶ is money elastic?. Answer: Yes!
More money is increased into circulation with more
demand.
▶ what would happen if we printed more money?. Answer: -If we printed
more there wouldn't be price stability
-It would devalue the money we currently have in circulation, making
producers raise prices in order to
maintain the same amount of profit for services or there would be a major
shortage.
-Would lead to inflation- the rise in the general level of prices.
~People would need more money to pay
for food, clothing, shelter, etc.
▶ banking (when and how did it start?). Answer: -Started in the Middle
Ages with Goldsmiths who kept gold and handed out paper receipts.
-Banking in the US began with Alexander Hamilton when he pushed for a
central bank in the US in 1791 which helped solidify US currency around
the world.
▶ what do banks do?. Answer: Accept and hold deposits
Make loans
Collect and transfer funds
QUESTIONS WITH ACCURATE
SOLUTIONS 2026
▶ The business cycle. Answer: The business cycle shows periods of
expansion and
recession- Economic Activity.
The periodic, but irregular up and down movements in
economic activity, measured by fluctuations in real GDP and other
macroeconomic variables.
▶ Employment Act of 1946. Answer: Through the ability to intervene in the
economy, the federal government committed itself to promote
maximum employment at low rates of inflation.
▶ example of fiscal policy. Answer: You own a business that sells
automobile parts
wholesale. Your business employs 30 workers
and is considering spending $2,000,000 to buy
a new computer system that could keep track of
inventory. If you and your firm put in the
system, you believe you could eliminate 10
workers who each earn $22,000 annually, plus
fringe benefits. The machine's lifespan is 10
years. What do you do?
▶ mutual coincidence of wants. Answer: In a barter system both parties
have to have exactly what the other wants
this is why we have money
▶ what is the value of money?. Answer: -Money doesn't have any inherent
value. It has value
through our use.
, -Money has value because of supply and demand.
There is a limited supply for the demand of other
items.
-If one believes money will have value in the future,
one will work towards acquiring some.
-!!!The value of our currency is dependent upon our
confidence in the market.!!!
~money is no longer backed by gold standard~
▶ what can change the value of money?. Answer: The value of money can
change due to consumer
confidence, government policy, costs of production,
costs of living, and competing markets.
▶ is money elastic?. Answer: Yes!
More money is increased into circulation with more
demand.
▶ what would happen if we printed more money?. Answer: -If we printed
more there wouldn't be price stability
-It would devalue the money we currently have in circulation, making
producers raise prices in order to
maintain the same amount of profit for services or there would be a major
shortage.
-Would lead to inflation- the rise in the general level of prices.
~People would need more money to pay
for food, clothing, shelter, etc.
▶ banking (when and how did it start?). Answer: -Started in the Middle
Ages with Goldsmiths who kept gold and handed out paper receipts.
-Banking in the US began with Alexander Hamilton when he pushed for a
central bank in the US in 1791 which helped solidify US currency around
the world.
▶ what do banks do?. Answer: Accept and hold deposits
Make loans
Collect and transfer funds
