Econ 212 Final Exam Study Guide || GUARANTEED
PASS!!!
3 types of unemployment correct answers --cyclical
--frictional
--structural
cyclical unemployment correct answers the increase in unemployment that occurs during
recessions and depressions
frictional unemployment correct answers unemployment due to normal turnover in the labor
market; used to denote short-run job/skill-matching problems
structural unemployment correct answers unemployment due to changes in the structure of
the economy that result in a significant loss of jobs in certain industries
Transfer payments correct answers --cash payments made by the government to people who
do not supply goods, services, or labor in exchange for these payments
--ex: social security benefits, veterans' benefits, and welfare payments
How do we account for transfer payments in GDP accounting? correct answers they are
counted as part of the total income received by the households
Real Interest Rate correct answers the difference between the interest rate on a loan and the
inflation rate
How is the real interest rate related to inflation? correct answers
Comparative Advantage correct answers --a producer has a comparative advantage over
another in the production of a good or service if he or she can produce that product at a lower
opportunity cost
--the advantage in the production of a good enjoyed by one country over another when that
good can be produced at a lower cost in terms of other goods than it could be in the other
country
opportunity cost correct answers the best alternatie that we give up, or forgo, when we make
a choice or decision
How do we determine comparative advantage? correct answers whoever can produce the
produce at a lower opporunity cost
Why do we use money for transactions? correct answers because it is:
1.) a means of payment (medium of exchange)
2.) a store of value
3.) a unit of account
means of payment or medium of exchange correct answers what sellars generally accept and
buyer generally use to pay for goods and services
, store of value correct answers an asset that can be used to transport purchasing power from
one time period to another
unit of account correct answers a standard unit that provides a consistent way of quoting
prices
liquidity property of money correct answers the property of money that makes it a good
medium exchange as well as a store of value: It is portable and readily accepted and thus
easily exchanged for goods
Barter correct answers --goods are exchanged directly for other goods
What is the advantage to using money as opposed to barter? correct answers --barter is costly
and inefficient in an economy with many different kinds of goods
--barter requires a double coincidence of wants for trade to take place
Commodity Monies correct answers items used as money that also have intrinsic value in
some other use
Fiat Monies correct answers items designated as money that are intrinsically worthless
Advantages of commodity monies correct answers --they have an alternative use apart from
serving as money
Advantages of fiat monies correct answers --the money is legal tender (the government has
required that it be accepted in the settlement of debts)
--paper money is required to be used to pay taxes
--more convenient to carry around
M1 (transactions money) correct answers --money that can be directly used for transactions
What makes up M1? correct answers currency held outside banks + demand deposits +
traveler's checks + other checkable deposits
How do we measure M1? correct answers stock measure (measured at a point in time)
What can we say about the stability of M1 as opposed to M2? correct answers --M1 is less
stable than M2
How do banks loan out more funds than they have in reserves? correct answers --banks create
money by making loans
--when a bank makes a loan to a customer, it creates a deposit in that customer's account--
>this deposit becomes part of the money supply
--banks can create money only when they have excess reserves (reserves in excess of the
amount set by the required reserve ratio)
reserves correct answers the deposits that a bank has at the Federal Reserve bank plus its cash
on hand
PASS!!!
3 types of unemployment correct answers --cyclical
--frictional
--structural
cyclical unemployment correct answers the increase in unemployment that occurs during
recessions and depressions
frictional unemployment correct answers unemployment due to normal turnover in the labor
market; used to denote short-run job/skill-matching problems
structural unemployment correct answers unemployment due to changes in the structure of
the economy that result in a significant loss of jobs in certain industries
Transfer payments correct answers --cash payments made by the government to people who
do not supply goods, services, or labor in exchange for these payments
--ex: social security benefits, veterans' benefits, and welfare payments
How do we account for transfer payments in GDP accounting? correct answers they are
counted as part of the total income received by the households
Real Interest Rate correct answers the difference between the interest rate on a loan and the
inflation rate
How is the real interest rate related to inflation? correct answers
Comparative Advantage correct answers --a producer has a comparative advantage over
another in the production of a good or service if he or she can produce that product at a lower
opportunity cost
--the advantage in the production of a good enjoyed by one country over another when that
good can be produced at a lower cost in terms of other goods than it could be in the other
country
opportunity cost correct answers the best alternatie that we give up, or forgo, when we make
a choice or decision
How do we determine comparative advantage? correct answers whoever can produce the
produce at a lower opporunity cost
Why do we use money for transactions? correct answers because it is:
1.) a means of payment (medium of exchange)
2.) a store of value
3.) a unit of account
means of payment or medium of exchange correct answers what sellars generally accept and
buyer generally use to pay for goods and services
, store of value correct answers an asset that can be used to transport purchasing power from
one time period to another
unit of account correct answers a standard unit that provides a consistent way of quoting
prices
liquidity property of money correct answers the property of money that makes it a good
medium exchange as well as a store of value: It is portable and readily accepted and thus
easily exchanged for goods
Barter correct answers --goods are exchanged directly for other goods
What is the advantage to using money as opposed to barter? correct answers --barter is costly
and inefficient in an economy with many different kinds of goods
--barter requires a double coincidence of wants for trade to take place
Commodity Monies correct answers items used as money that also have intrinsic value in
some other use
Fiat Monies correct answers items designated as money that are intrinsically worthless
Advantages of commodity monies correct answers --they have an alternative use apart from
serving as money
Advantages of fiat monies correct answers --the money is legal tender (the government has
required that it be accepted in the settlement of debts)
--paper money is required to be used to pay taxes
--more convenient to carry around
M1 (transactions money) correct answers --money that can be directly used for transactions
What makes up M1? correct answers currency held outside banks + demand deposits +
traveler's checks + other checkable deposits
How do we measure M1? correct answers stock measure (measured at a point in time)
What can we say about the stability of M1 as opposed to M2? correct answers --M1 is less
stable than M2
How do banks loan out more funds than they have in reserves? correct answers --banks create
money by making loans
--when a bank makes a loan to a customer, it creates a deposit in that customer's account--
>this deposit becomes part of the money supply
--banks can create money only when they have excess reserves (reserves in excess of the
amount set by the required reserve ratio)
reserves correct answers the deposits that a bank has at the Federal Reserve bank plus its cash
on hand
