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PUP 3002 EXAM 2 Questions with Answers
(100% Correct Answers)
Inflation Answer: when there are too few goods and services(and labor supply)
available in the market, making prices rise
Is low or high inflation desirable? Answer: low inflation
Positive balance of trade Answer: politically desired because the average citizen
believes it is better to be a net exporter and import a smaller portion of what
they consume; exports minus imports
Economic growth Answer: the increase in the market value of the goods and
services produced by the economy; attributed to an increase in productivity
Real GDP Answer: the percent rate of increase in GDP adjusted for inflation
Per capita income Answer: the growth of the ratio of GDP to population
Employment rate Answer: ratio that measure the proportion of the country's
working age population that is employed; around 4-5%
The classical model Answer: also called the laissez-faire model; supply and
demand are natural regulatory tools and the economy regulates itself; less
spending during a recession
Austerity Answer: means policies that reduce a government's budget deficit
which include government spending, raising taxes, or both
Keynesian approach Answer: encourages deficit spending which means to
spend more than budgeted; more spending during a recession
Monetary spending Answer: involves the managing the supply of money and
its done by the Federal Reserve
Who picks the chairperson and the six other members of the Federal Reserve?
Answer: picked by the President and approved by the Senate
, 2
What is the main job of the Federal Reserve? Answer: to set the discount rate
which is the rate that members have to pay the Fed for money; lower discount
rates to the bank translate into lower interest rates for consumers and when
interest rates are low, money is cheap to borrow; more expensive interest rates
constrain the economic activity
Fiscal policy Answer: involves taxing and spending decisions and its done by
the President and Congress
What is the collective action problem regarding taxes? Answer: society wants
specific programs, but individuals may not be willing to pay for them
Progressive taxation Answer: involve the wealthier members of society paying
a higher portion of their incomes as taxes (US, UK, France)
Regressive taxation Answer: occurs when poorer persons pay a larger share of
their income and examples include sales taxes
Proportional taxation Answer: everyone, regardless of income pay the same
amount (Russia, Saudi Arabia)
Regulation Answer: involves government intervention in the decisions that
firms make or in market outcomes
Price setting Answer: the government sets a price ceiling or a floor on an
industry with limited competition
Entry restrictions Answer: have to meet certain criteria to be able to do
something; example is a license to cut hair
Service obligations Answer: example: hospitals must provide care for people
who are in need or attorneys must provide a set amount of pro bono work
Oversight Answer: decisions that firms make are subject to government
scrutiny
PUP 3002 EXAM 2 Questions with Answers
(100% Correct Answers)
Inflation Answer: when there are too few goods and services(and labor supply)
available in the market, making prices rise
Is low or high inflation desirable? Answer: low inflation
Positive balance of trade Answer: politically desired because the average citizen
believes it is better to be a net exporter and import a smaller portion of what
they consume; exports minus imports
Economic growth Answer: the increase in the market value of the goods and
services produced by the economy; attributed to an increase in productivity
Real GDP Answer: the percent rate of increase in GDP adjusted for inflation
Per capita income Answer: the growth of the ratio of GDP to population
Employment rate Answer: ratio that measure the proportion of the country's
working age population that is employed; around 4-5%
The classical model Answer: also called the laissez-faire model; supply and
demand are natural regulatory tools and the economy regulates itself; less
spending during a recession
Austerity Answer: means policies that reduce a government's budget deficit
which include government spending, raising taxes, or both
Keynesian approach Answer: encourages deficit spending which means to
spend more than budgeted; more spending during a recession
Monetary spending Answer: involves the managing the supply of money and
its done by the Federal Reserve
Who picks the chairperson and the six other members of the Federal Reserve?
Answer: picked by the President and approved by the Senate
, 2
What is the main job of the Federal Reserve? Answer: to set the discount rate
which is the rate that members have to pay the Fed for money; lower discount
rates to the bank translate into lower interest rates for consumers and when
interest rates are low, money is cheap to borrow; more expensive interest rates
constrain the economic activity
Fiscal policy Answer: involves taxing and spending decisions and its done by
the President and Congress
What is the collective action problem regarding taxes? Answer: society wants
specific programs, but individuals may not be willing to pay for them
Progressive taxation Answer: involve the wealthier members of society paying
a higher portion of their incomes as taxes (US, UK, France)
Regressive taxation Answer: occurs when poorer persons pay a larger share of
their income and examples include sales taxes
Proportional taxation Answer: everyone, regardless of income pay the same
amount (Russia, Saudi Arabia)
Regulation Answer: involves government intervention in the decisions that
firms make or in market outcomes
Price setting Answer: the government sets a price ceiling or a floor on an
industry with limited competition
Entry restrictions Answer: have to meet certain criteria to be able to do
something; example is a license to cut hair
Service obligations Answer: example: hospitals must provide care for people
who are in need or attorneys must provide a set amount of pro bono work
Oversight Answer: decisions that firms make are subject to government
scrutiny
