Economics D089 WGU Exam Questions with Correct Answers 100% Verified By Experts|
Latest Update Guaranteed Success
What is the labor force participation rate in a country with a labor force of 350 million and a
population of 500 million people? 350/500 = 0.7 * 100 = 70%
What are the three types of unemployment? 1. Frictional
2. Structural
3. Cyclical
What is the natural rate of unemployment? 4-6%
How is inflation measured in the U.S.? Tracking how a basket of goods and services price
changes over time
Identify and explain two problems with the way inflation is measured. change in quality of
goods - prices rises may not reflect inflation, but just the fact it is an improved good.
Substitution bias-consumers find less expensive goods to purchase
What are menu costs? the costs to firms of changing prices
Explain how inflation can lead to a loss of purchasing power for individuals. When wages do
not increase every year at the same rate as inflation, every dollar earned will be less valuable.
Will not be able to purchase the same amount as before.
Which groups benefit from inflation? Explain. barrowers benefit because the amount the
value of money they pay back is less
Draw a graph of Aggregate Demand. Make sure to label the axis.
,How does the quantity of GDP demanded change as the price level in the economy increases?
Illustrate this on your graph. It leads to a lower quantity of spending on domestic goods and
services decline
List and explain the components of aggregate demand. Consumption spending when
disposable income increases, so does consumption spending and AD shifts to the right.
When disposable income decreases so does consumption spending and AD shifts to the left.
Investment spending Firms make investment decisions based on how the goods will affect their
profits, Decreases in investments causes the AD to shift tot he left and increases in investments
cause the AD to shift to the rightgovernment spending:spending on the net exports or exports
minus imports. C + I +G + x - M
Identify the factors that shift AD. Wealth effect, interest rate effect, and foreign price effect
Draw a graph of short run AS. Make sure to label the axis.
Why is the short-run AS curve (SRAS) upward sloping?
Why is the long-run AS curve (LRAS) vertical?
What is the relationship between the LRAS, potential GDP, and full-employment GDP?
Identify the factors that shift the LRAS curve.
Identify the factors that shift the SRAS curve.
Use the AS-AD model to explain what happens in each of the following scenarios. In each case,
begin with a graph showing the economy in long run equilibrium. Move the appropriate curve.
, Identify the new equilibrium explaining what happens to price and GDP. In each case identify
whether the change results in an expansionary or a recessionary gap.
a. Consumer confidence increases
b. Wages increase
c. An increase in capital generates higher labor productivity
Identify and describe the four functions of money. Identify and describe the four functions
of money.
Explain this
medium of exchange, a store of value, unit of account and a standard of deferred payment
What is included in the M1 measure of money? How does this differ from the M2 measure of
money? M1 is monies that are very liquid such as cash, checkable deposits, and traveler's
checks.M2 is less liquid and includes M1 plus those classified as near money like savings, time
deposits, certificates of deposits and money market funds.
What is a fractional reserve banking system? banks keep a fraction of deposits as reserves
and use the rest to make loans
What are the responsibilities of the Federal Reserve? Promote financial stability, provide
regulations and banking services, and conduct monetary policy
. Using a graph of the money market, show what happens to interest rates when the FED
decreases the money supply.
Identify two factors that can shift the demand for money. Price level, inflation or income
How would an increase in the demand for money change the interest rate? An increase in
the demand for money initially creates a shortage of money and ultimately increases the
nominal interest rate
Latest Update Guaranteed Success
What is the labor force participation rate in a country with a labor force of 350 million and a
population of 500 million people? 350/500 = 0.7 * 100 = 70%
What are the three types of unemployment? 1. Frictional
2. Structural
3. Cyclical
What is the natural rate of unemployment? 4-6%
How is inflation measured in the U.S.? Tracking how a basket of goods and services price
changes over time
Identify and explain two problems with the way inflation is measured. change in quality of
goods - prices rises may not reflect inflation, but just the fact it is an improved good.
Substitution bias-consumers find less expensive goods to purchase
What are menu costs? the costs to firms of changing prices
Explain how inflation can lead to a loss of purchasing power for individuals. When wages do
not increase every year at the same rate as inflation, every dollar earned will be less valuable.
Will not be able to purchase the same amount as before.
Which groups benefit from inflation? Explain. barrowers benefit because the amount the
value of money they pay back is less
Draw a graph of Aggregate Demand. Make sure to label the axis.
,How does the quantity of GDP demanded change as the price level in the economy increases?
Illustrate this on your graph. It leads to a lower quantity of spending on domestic goods and
services decline
List and explain the components of aggregate demand. Consumption spending when
disposable income increases, so does consumption spending and AD shifts to the right.
When disposable income decreases so does consumption spending and AD shifts to the left.
Investment spending Firms make investment decisions based on how the goods will affect their
profits, Decreases in investments causes the AD to shift tot he left and increases in investments
cause the AD to shift to the rightgovernment spending:spending on the net exports or exports
minus imports. C + I +G + x - M
Identify the factors that shift AD. Wealth effect, interest rate effect, and foreign price effect
Draw a graph of short run AS. Make sure to label the axis.
Why is the short-run AS curve (SRAS) upward sloping?
Why is the long-run AS curve (LRAS) vertical?
What is the relationship between the LRAS, potential GDP, and full-employment GDP?
Identify the factors that shift the LRAS curve.
Identify the factors that shift the SRAS curve.
Use the AS-AD model to explain what happens in each of the following scenarios. In each case,
begin with a graph showing the economy in long run equilibrium. Move the appropriate curve.
, Identify the new equilibrium explaining what happens to price and GDP. In each case identify
whether the change results in an expansionary or a recessionary gap.
a. Consumer confidence increases
b. Wages increase
c. An increase in capital generates higher labor productivity
Identify and describe the four functions of money. Identify and describe the four functions
of money.
Explain this
medium of exchange, a store of value, unit of account and a standard of deferred payment
What is included in the M1 measure of money? How does this differ from the M2 measure of
money? M1 is monies that are very liquid such as cash, checkable deposits, and traveler's
checks.M2 is less liquid and includes M1 plus those classified as near money like savings, time
deposits, certificates of deposits and money market funds.
What is a fractional reserve banking system? banks keep a fraction of deposits as reserves
and use the rest to make loans
What are the responsibilities of the Federal Reserve? Promote financial stability, provide
regulations and banking services, and conduct monetary policy
. Using a graph of the money market, show what happens to interest rates when the FED
decreases the money supply.
Identify two factors that can shift the demand for money. Price level, inflation or income
How would an increase in the demand for money change the interest rate? An increase in
the demand for money initially creates a shortage of money and ultimately increases the
nominal interest rate
