WGU D089 PRINCIPLES OF ECONOMICS ALL UPDATED
EXAMS QUESTIONS AND ANSWERS SURE A+
✔✔Savings deposits - ✔✔Bank account where you cannot withdraw money by writing a
check, but can withdraw the money at a bank or transfer it easily to a checking account
✔✔Interest rate - ✔✔The percentage of an amount of money charged for its use per
some period of time (often a year)
✔✔Smart card - ✔✔Stores a certain value of money on a card and then the card can be
used to make purchases
✔✔Reserves - ✔✔Bank's holdings of deposits in accounts with their central bank plus
currency that is physically help in the bank's vault
✔✔Reserve requirement - ✔✔The percentage amount of its total deposits that a bank is
legally obligated to either hold as cash in its vault or deposit with the central bank
✔✔Monetary policy - ✔✔All of the Federal Reserve actions that change the money
supply with the goal of curbing inflation or reducing economic stagnation or recession
✔✔Open Market Operations - ✔✔The central bank selling or buying Treasury bonds to
influence the quantity of money and the level of interest rates
✔✔The four main policy tools used by the Federal Reserve - ✔✔1. Setting the reserve
requirements
2. Operating the discount window
3. Conducting open market operations
4. Paying interest on reserves
✔✔Discount rate - ✔✔The minimum interest rate set by the Federal reserve for lending
to other banks
✔✔Securities - ✔✔Stocks and bonds
✔✔Expansionary monetary policy - ✔✔When the central bank uses its tools to stimulate
the economy that increases the money supply, lowers interest rate, and increases
aggregate demand
✔✔Contractionary monetary policy - ✔✔An economic policy used to fight inflation by
decreasing the money supply
✔✔Bank runs - ✔✔When a large number of customers of a bank or other financial
institution withdraw their deposits simultaneously over concerns of the banks solvency
,✔✔Federal funds rate - ✔✔The rate banks charge other banks for overnight loans
✔✔Countercyclical - ✔✔Moving in the opposite direction of the business cycle of
economic downturns and upswings
✔✔Business cycles - ✔✔A series of growing and shrinking periods of economic activity
measured by increases and decreases in GDP
✔✔Fiscal policy - ✔✔Government policy that attempts to influence the direction of the
economy through changes in government spending or taxes with a goal to fight inflation
or decrease unemployment
✔✔Discretionary spending - ✔✔A type of government spending that is implemented
through an appropriations bill and is therefore optional
✔✔Automatic stabilizers - ✔✔A type of fiscal policy designed to offset fluctuations in the
nation's economy through normal operations
✔✔Deficit spending - ✔✔A government practice of spending more than revenue
collected in a given budget year
✔✔Crowding out - ✔✔When government outbids private bond interest rates to get
loans, money leaves the private sector and interest rates increase.
✔✔Budget deficit - ✔✔When the federal government spends more money than it
receives in taxes in a given year
✔✔Budget surplus - ✔✔When the government receives more money in taxes than it
spends in a year
✔✔Balanced budget - ✔✔When the government spends exactly the same amount as it
receives in a given year
✔✔Phillips Curve - ✔✔A graph that shows the inverse relationship between the rate of
unemployment and the rate of inflation in an economy
✔✔Tariffs - ✔✔A tax imposed on imported goods or services
✔✔Comparative Advantage - ✔✔The ability of a part to produce a particular good or
service at a lower opportunity cost versus another
✔✔Exporting - ✔✔The act of shipping goods and services from one country to another
, ✔✔Wholesalers - ✔✔A person or company that sells goods in large quantities at low
prices, typically to retailers
✔✔Protectionism - ✔✔A policy or protecting the domestic producers of a product by
imposing tariffs, quotas, or other barriers on imports
✔✔Quotas - ✔✔A limited quantity or dollar amount of a particular product that can be
imported or exported in a particular time period
✔✔Autarky - ✔✔National economic self-sufficiency
✔✔Absolute Advantage - ✔✔The capability to produce more of a given product using
less of a given resource than a competing entity
✔✔World price - ✔✔The price set by competitors who have a comparative advantage
for producing the good or service
✔✔Competitive advantage - ✔✔Something that places a company or a person about
the competition
✔✔Trade diversion - ✔✔When trade is diverted from a more efficient exporter toward a
less efficient one by the formation of a free trade agreement or customs union
✔✔Economic inefficiency - ✔✔When all goods and factors of production are not
allocated to serve their highest and best use, minimizing waste and inefficiency
✔✔Import tariffs - ✔✔Taxes on goods that are imported into a country. They are more
common than export tariffs
✔✔Export tariffs - ✔✔Taxes on goods that are leaving a country. Taxing exports may be
done to raise tariff revenue or restrict the world supply of a good
✔✔Protective tariffs - ✔✔Tariffs to protect a domestic industry by making imported
goods more expensive than equivalent goods produced domestically
✔✔Specific tariffs - ✔✔Import tax expressed in an amount of money per unit imported
✔✔Ad valorem tariffs - ✔✔Import tax based on a fixed percentage of the assessed
commercial value of imported goods
✔✔Compound tariffs - ✔✔A tax on imported goods that is a combination of a fixed
amount and an amount based on the value of the goods
EXAMS QUESTIONS AND ANSWERS SURE A+
✔✔Savings deposits - ✔✔Bank account where you cannot withdraw money by writing a
check, but can withdraw the money at a bank or transfer it easily to a checking account
✔✔Interest rate - ✔✔The percentage of an amount of money charged for its use per
some period of time (often a year)
✔✔Smart card - ✔✔Stores a certain value of money on a card and then the card can be
used to make purchases
✔✔Reserves - ✔✔Bank's holdings of deposits in accounts with their central bank plus
currency that is physically help in the bank's vault
✔✔Reserve requirement - ✔✔The percentage amount of its total deposits that a bank is
legally obligated to either hold as cash in its vault or deposit with the central bank
✔✔Monetary policy - ✔✔All of the Federal Reserve actions that change the money
supply with the goal of curbing inflation or reducing economic stagnation or recession
✔✔Open Market Operations - ✔✔The central bank selling or buying Treasury bonds to
influence the quantity of money and the level of interest rates
✔✔The four main policy tools used by the Federal Reserve - ✔✔1. Setting the reserve
requirements
2. Operating the discount window
3. Conducting open market operations
4. Paying interest on reserves
✔✔Discount rate - ✔✔The minimum interest rate set by the Federal reserve for lending
to other banks
✔✔Securities - ✔✔Stocks and bonds
✔✔Expansionary monetary policy - ✔✔When the central bank uses its tools to stimulate
the economy that increases the money supply, lowers interest rate, and increases
aggregate demand
✔✔Contractionary monetary policy - ✔✔An economic policy used to fight inflation by
decreasing the money supply
✔✔Bank runs - ✔✔When a large number of customers of a bank or other financial
institution withdraw their deposits simultaneously over concerns of the banks solvency
,✔✔Federal funds rate - ✔✔The rate banks charge other banks for overnight loans
✔✔Countercyclical - ✔✔Moving in the opposite direction of the business cycle of
economic downturns and upswings
✔✔Business cycles - ✔✔A series of growing and shrinking periods of economic activity
measured by increases and decreases in GDP
✔✔Fiscal policy - ✔✔Government policy that attempts to influence the direction of the
economy through changes in government spending or taxes with a goal to fight inflation
or decrease unemployment
✔✔Discretionary spending - ✔✔A type of government spending that is implemented
through an appropriations bill and is therefore optional
✔✔Automatic stabilizers - ✔✔A type of fiscal policy designed to offset fluctuations in the
nation's economy through normal operations
✔✔Deficit spending - ✔✔A government practice of spending more than revenue
collected in a given budget year
✔✔Crowding out - ✔✔When government outbids private bond interest rates to get
loans, money leaves the private sector and interest rates increase.
✔✔Budget deficit - ✔✔When the federal government spends more money than it
receives in taxes in a given year
✔✔Budget surplus - ✔✔When the government receives more money in taxes than it
spends in a year
✔✔Balanced budget - ✔✔When the government spends exactly the same amount as it
receives in a given year
✔✔Phillips Curve - ✔✔A graph that shows the inverse relationship between the rate of
unemployment and the rate of inflation in an economy
✔✔Tariffs - ✔✔A tax imposed on imported goods or services
✔✔Comparative Advantage - ✔✔The ability of a part to produce a particular good or
service at a lower opportunity cost versus another
✔✔Exporting - ✔✔The act of shipping goods and services from one country to another
, ✔✔Wholesalers - ✔✔A person or company that sells goods in large quantities at low
prices, typically to retailers
✔✔Protectionism - ✔✔A policy or protecting the domestic producers of a product by
imposing tariffs, quotas, or other barriers on imports
✔✔Quotas - ✔✔A limited quantity or dollar amount of a particular product that can be
imported or exported in a particular time period
✔✔Autarky - ✔✔National economic self-sufficiency
✔✔Absolute Advantage - ✔✔The capability to produce more of a given product using
less of a given resource than a competing entity
✔✔World price - ✔✔The price set by competitors who have a comparative advantage
for producing the good or service
✔✔Competitive advantage - ✔✔Something that places a company or a person about
the competition
✔✔Trade diversion - ✔✔When trade is diverted from a more efficient exporter toward a
less efficient one by the formation of a free trade agreement or customs union
✔✔Economic inefficiency - ✔✔When all goods and factors of production are not
allocated to serve their highest and best use, minimizing waste and inefficiency
✔✔Import tariffs - ✔✔Taxes on goods that are imported into a country. They are more
common than export tariffs
✔✔Export tariffs - ✔✔Taxes on goods that are leaving a country. Taxing exports may be
done to raise tariff revenue or restrict the world supply of a good
✔✔Protective tariffs - ✔✔Tariffs to protect a domestic industry by making imported
goods more expensive than equivalent goods produced domestically
✔✔Specific tariffs - ✔✔Import tax expressed in an amount of money per unit imported
✔✔Ad valorem tariffs - ✔✔Import tax based on a fixed percentage of the assessed
commercial value of imported goods
✔✔Compound tariffs - ✔✔A tax on imported goods that is a combination of a fixed
amount and an amount based on the value of the goods
