age 1 of 97
ECON 2020 EXAM 3 PREP 2025/2026 COMPLETE
QUESTIONS WITH CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS <BRAND NEW VERSION>
Expansionary monetary policy .......Answer.........occurs when a
central bank acts to increase the money supply in an effort to
stimulate the economy. Typically does this by buying bonds.
Contractionary monetary policy .......Answer.........occurs when a
central bank takes action that reduces the money supply in the
economy. Sells bonds in the loanable funds market because the
banks buy the bonds from the central bank with money they
might otherwise lend out.
3 limitations of monetary policy .......Answer.........1. long run
causes effects to diminish
2. expectations can lessen results
,age 2 of 97
3. when it is AS shifting not AD
Monetary neutrality .......Answer.........idea that the money supply
does not affect real economic variables
Phillips curve .......Answer.........short term inverse relationship
between inflation and unemployment
Adaptive expectations theory .......Answer.........holds that
people's expectations of future inflation are based on their most
recent experience.
Stagflation .......Answer.........combination of high unemployment
rates and high inflation
Rational expectations theory .......Answer.........holds that people
form expectations on the basis of all available information. They
,age 3 of 97
use more than just todays current level of inflation to predict
next years. makes activist policy make no gains whatsoever.
Active monetary policy .......Answer.........involves the strategic use
of monetary policy to counteract macroeconomic expansions and
contractions.
Passive monetary policy .......Answer.........occurs when central
banks purposefully choose only to stabilize money supply and
price levels through monetary policy does not seek to use
inflation to affect real variables including unemployment and
real GDP
Scarcity .......Answer.........refers to the limited nature of society's
resources given society's unlimited wants and needs
Economics .......Answer.........study of how people allocate their
limited resources to satisfy their nearly unlimited wants.
, age 4 of 97
Trade .......Answer.........voluntary exchange of goods and
services between two or more parties.
Comparative advantage .......Answer.........refers to the situation
where an individual, business, or country can produce at a lower
opporunity cost than a competitor can.
Positive statement .......Answer.........can be tested and validated.
"The unemployment rate is 7%" What economists are concerned
with,
Normative statement .......Answer.........cannot be tested or
validated. "what ought to be" "an unemployed worker should
recieve financial assistance to help make ends met" A matter of
opinion.
ECON 2020 EXAM 3 PREP 2025/2026 COMPLETE
QUESTIONS WITH CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS <BRAND NEW VERSION>
Expansionary monetary policy .......Answer.........occurs when a
central bank acts to increase the money supply in an effort to
stimulate the economy. Typically does this by buying bonds.
Contractionary monetary policy .......Answer.........occurs when a
central bank takes action that reduces the money supply in the
economy. Sells bonds in the loanable funds market because the
banks buy the bonds from the central bank with money they
might otherwise lend out.
3 limitations of monetary policy .......Answer.........1. long run
causes effects to diminish
2. expectations can lessen results
,age 2 of 97
3. when it is AS shifting not AD
Monetary neutrality .......Answer.........idea that the money supply
does not affect real economic variables
Phillips curve .......Answer.........short term inverse relationship
between inflation and unemployment
Adaptive expectations theory .......Answer.........holds that
people's expectations of future inflation are based on their most
recent experience.
Stagflation .......Answer.........combination of high unemployment
rates and high inflation
Rational expectations theory .......Answer.........holds that people
form expectations on the basis of all available information. They
,age 3 of 97
use more than just todays current level of inflation to predict
next years. makes activist policy make no gains whatsoever.
Active monetary policy .......Answer.........involves the strategic use
of monetary policy to counteract macroeconomic expansions and
contractions.
Passive monetary policy .......Answer.........occurs when central
banks purposefully choose only to stabilize money supply and
price levels through monetary policy does not seek to use
inflation to affect real variables including unemployment and
real GDP
Scarcity .......Answer.........refers to the limited nature of society's
resources given society's unlimited wants and needs
Economics .......Answer.........study of how people allocate their
limited resources to satisfy their nearly unlimited wants.
, age 4 of 97
Trade .......Answer.........voluntary exchange of goods and
services between two or more parties.
Comparative advantage .......Answer.........refers to the situation
where an individual, business, or country can produce at a lower
opporunity cost than a competitor can.
Positive statement .......Answer.........can be tested and validated.
"The unemployment rate is 7%" What economists are concerned
with,
Normative statement .......Answer.........cannot be tested or
validated. "what ought to be" "an unemployed worker should
recieve financial assistance to help make ends met" A matter of
opinion.
